Accounting Best Practices, Fifth Edition

5–7. Budget by Groups of Staff Positions

The payroll portion of the budget model can be an excessively long one because every person in the company is listed on it. In particular, many accountants have difficulty avoiding a complete listing of all people who are not categorized as direct labor. As a result, this portion of the budget becomes an unwieldy cluster of information, requiring a long time to read, as well as a considerable amount of updating work to keep track of everyone’s pay levels.

A simple best practice is to summarize these positions by title, ensuring that there are far fewer line items, so the budget becomes much easier to update and review. To do so, one must summarize the pay levels of everyone with the same job title and post the average pay rate in the model. For those people who object that they can no longer determine who is summarized into which category, one can either issue a separate list that identifies the title of each person in the company or else insert the initials of all the people with each job title next to the summary-level description in the budget (a difficult proposition when there are many people with the same title!). The only real problem is in those companies where there is no record of the job titles of employees. In this case, it may be sufficient to summarize all payroll for each department into a single line item in the budget, with ...