Budgeting framework and standard costing framework are similar:
- plans set
- performance targets established
- outcome measures compared against targets
- corrective action taken if required
Organisation should have corporate strategy, based on that:
- set of business/service strategies
- operational strategies
- business/service action plans
Organisations within parts of public service which are not businesses or quasi-businesses.
These set organisations’s long-term objectives and goals. Budgets are financial representations of plans required to meet objectives. Budgets tend to be shorter term, typically a year.
Budget signals a demand for financial resources in order to realise corporate & business plans. This demand can be for labour, capital, materials etc. Budgets may be assigned to managers for their operations within departments.
Budgets are controlled centrally and contain targets for managers to meet. If targets are unachievable they have a negative effect such as cross-charging.