What is a 'Budget Manual'

A budget manual is a set of instructions used by large organizations to prepare budgets. As organizations become larger and more complex, it is no longer possible for one person to prepare a budget. Instead, budgeting across the enterprise must be carefully coordinated. Financial analysts work closely with each group to collect budget information on a pre-set schedule and then send data up through higher rungs of financial controllers until it can be aggregated by the CFO's office.

BREAKING DOWN 'Budget Manual'

Budgeting within large organizations is an extremely complex task. Financial analysts must make assumptions about what the future will look like based on past data. This means that even the best budgeting process is subject to considerable inaccuracies. Then, as the year progresses, each group is held to a predefined budget, which may become inadequate due to changing conditions. On the other hand, some groups will find that they have more money than they require, and may choose to surreptitiously use up the "extra" budget with unnecessary expenditures in order to avoid budget cuts.

Example of a Budget Manual

For example, the quality assurance department of the XYZ company is allowed a budget of $500,000 per year. This money can be spent on salaries, additional training, equipment and other things the quality assurance department needs. Cindy, a longtime veteran of the quality assurance department, has left the company. The quality assurance department can cover the workload and keep running just fine without her, but to ensure they do not lose part of their budget for maintaining their head count they need to hire another person and spend the remaining money that would have gone to Cindy's salary on training for the new person.

RELATED TERMS
  1. Budget Committee

    A budget committee is a group of people that creates and maintains ...
  2. Balanced Budget

    A balanced budget is a situation in financial planning or the ...
  3. Budget Planning Calendar

    A budget planning calendar is a schedule of activities that must ...
  4. Annual Budget

    An annual budget outlines projected items on income, balance ...
  5. Administrative Budget

    A administrative budget focuses on the costs of running an operation ...
  6. Promotional Budget

    A promotional budget is money set aside to promote a business's ...
Related Articles
  1. Personal Finance

    How budgeting works for companies

    Budgeting is an integral part of running a business efficiently and effectively. Learn more about the two types of budgets that companies commonly use: static and flexible.
  2. Investing

    Capital Budgeting

    Learn the process through which businesses determine whether projects are worth pursuing.
  3. Personal Finance

    5 Reasons Why You Can't Stick To Your Budget

    You want to stay on track with your finances, but these fatal budgeting flaws may be holding you back.
  4. Personal Finance

    5 Steps Toward Creating an Effective Budget

    Creating a budget can seem daunting, but it doesn't have to be. Use these five steps to create an effective budget you can live with.
  5. Personal Finance

    How to Create a Budget You Can Stick With

    Following a budget can be difficult. But it’s usually the difference between living a stressful retirement versus the retirement of your dreams.
  6. Personal Finance

    Budgeting Basics

    What is budgeting? Basically, it's making sure that you're spending less than you're bringing in and planning financially for both the short and long term.
  7. Personal Finance

    6 Reasons Why You NEED a Budget

    By now, you're probably sick of hearing the b word. Too bad. This is just of those financial lessons that cannot be preached enough.
RELATED FAQS
  1. How do budgeting and financial forecasting differ?

    Budgeting helps management members set expectations for where they want their company to go and financial forecasting measures ... Read Answer >>
  2. How can you use a cash flow statement to make a budget?

    To use the cash flow statement to make a budget, a company needs to combine the operating cash flow portion with its cash ... Read Answer >>
  3. Which countries run the largest budget deficits?

    Discover the countries with the largest budget deficits and what it means. Deficits are influenced by the economy and also ... Read Answer >>
Trading Center