Accounting Best Practices, Fifth Edition

Summary

This chapter focused primarily on those best practices that improve a budget model’s ease of use as well as the quality of the information it produces. These are the very issues most managers complain about, since many budget models take an eternity to produce and are not that accurate when released. Since the bulk of the changes in this area are easy and inexpensive to implement, there is no reason why an active and enterprising accounting manager cannot swiftly replace the old budgeting system with one that is easy to use and results in excellent budgeting information.

There was a lesser focus on best practices that enhance one’s use of the budget once it has been produced. Since the budget is an excellent control tool, the best of these practices is one that ties the budget directly to the purchase order system, so that purchase orders can be automatically compared to the remaining available budget and rejected by the computer if there are no budgeted funds remaining. Another best practice links employee performance to the budget, while another creates a summarized budget model for further financial modeling work by members of management. These are effective ways to maximize the budget once it has been produced.