Budgeting Basics and Beyond

3.2. Budget Manual

A budget manual describes how a budget is to be prepared. Items usually included in a budget manual are a planning calendar and distribution instructions for all budget schedules. Distribution instructions are important because, once a schedule is prepared, other departments within the organization will use the schedule to prepare their own budgets. Without distribution instructions, someone who needs a particular schedule may be overlooked.

The budget manual communicates throughout the company the policies and procedures for budget preparation. It lists the activities and rules to be followed in preparing a budget. It tells how the budget should be used by managers and who is responsible for the different aspects of the budgeting process, including preparation, presentation, reporting, evaluation, and approval. It should list positions rather than names to avoid unnecessary updating. A flow chart for budget preparation would be helpful. It provides the budgeting steps and aids in cooperation and coordination. The procedures to be followed to revise the budget based on changing conditions and goals should be specified. For example, revisions may be needed because of changing objectives, new methods, changing economic environment, and errors. The budget manual should receive participation from all affected managerial levels.

The budget manual stipulates authority, responsibility, and duties; fosters standardization; documents procedures; simplifies the process; ...