Assessment of the Value of the Budget Cycle
A budget cycle refers to the budgeting process’s life, which includes revenue estimation, budget formulation, hearings, adoption, and execution. Various departments and teams are involved in diverse teams. However, it is critical to evaluate the Christian perspectives on the concept of the budgeting cycle.
Revenue estimation is the first step in the budget cycle performed by the executive branch, such as the finance director, budget director, manager, or a selected team. Revenue estimation refers to calculating the amount of money returns that the company is likely to generate. Some of the critical concepts are forecasting the business growth rate, the customer population, and the products’ price so services. Revenue estimations by the executives help identify where the money for the company will come from. According to the Christian perspectives, “The plans of the diligent lead surely to abundance,” (Proverbs 21:5, NRSV). Thus, the company will not succeed in the other steps in the budgeting cycle without performing a revenue estimation.
After performing the revenue estimation, the company is required to formulate a budget. It is developed after reflecting on various business elements such as the past, current, and future goals. A budget is a focus for accountability and good stewardship. The budget formulation becomes the focus of the business needs and what they need to achieve. “For where your treasure is, there your heart will be also.” (Matthew 6:21, NRSV). The formulated concepts are what the business plans to achieve, which may vary from the formulated plan for other businesses.
The budget hearing is essential in the budgeting cycle because it considers other vital players’ views in the organization. Christianity emphasizes being gentle on others who may be of different views of others. More so, the lack of considering others’ views will affect the budgeting process by creating wrangles. The bible states that we should consider our interests and others in whatever we do (Philippians 2:3-4 NRSV). Respect for the view of others also helps concentrate on the primary purpose of the budget. For example, when some departments are not offered the budget they need and are allowed to raise their concern, it creates hostility in the organization.
The next step is budget adoption, which is the budget’s approval after all the parties have offered the viewpoints and the various concepts included in the final draft. According to Mikesell (2018), the administration is required to present the budget for adoption to the board. The procedures allow for the budget reviews by all the involved parties before it is passed. In some cases, a vote is given to adopting the budget.
The last phase is budget execution, which involves implementing the budgeted concepts, such as releasing the money to various departments. According to Rubin (2015), there are five steps involved in budget execution: the release of the funds per the approved budget, initiation of expenditure, payments for the expenditures, recording of the expenditure transactions, and proposal of the execution report. The goal of the procedure s to increase accountability in the budgeting cycle and the expenditure process. The Christian concepts emphasize that those entrusted at various levels should prove faithful (1 Corinthians 4:2, NRSV). People who misuse the budget increases the chances of project failure, and they are unfaithful.
Assessment of the Value of Budgetary Planning Techniques
Budgetary planning techniques are essential in determining the allocation for effective budget control. One of the main tools in budgetary planning is the trend analysis technique. The method is used in the analysis for predicting future stock or expenditure based on recently observed trends. Trend analysis argues that what has happened in the past can dictate what will happen in the future. The three significant trends used in the technique are short-term, intermediate, and long-term. According to the Christian views, “Without counsel plans fail, but with many advisers, they succeed (Proverbs 15:22 NRSV). In this case, trend analysis helps reconsider budgetary planning’s past failure and then use those lessons to establish a better budget.
On the other hand, Driver-Based Planning involves identifying the company’s key drivers and developing a plan based on how those drivers impact the budget’s success. It helps identify the most significant drivers and then uses them to the advantage of the company. The Talents’ Parable in the Bible emphasizes that Christians should not let fear hold them back (Matthew 25:14–30). The past mistakes should be a lesson, and therefore, we should use them in achieving the desired outcomes. More so, the Financial Modeling improved on the concept of Driver-Based Planning through the introduction of equations. In the Parable of the Talents, the third person was afraid that taking the risk would lead to his investment loss. However, the worst thing an investor can do is to stop investing or planning. Instead, calculated planning can help develop a better budget.
The last technique is Forecasting, which is the use of the various methods to come up with the desired budget plan. It involves considering historical data and the current market conditions and thus settles on how much revenue a company intends to get.