Budgeting Basics and Beyond

23.3. Conclusion

This chapter addresses the special features of the service industry. Special attention should be devoted to budgetary planning and control techniques in the service industry for two reasons. First, many service businesses have become more competitive in recent years. When competition increases, planning and control become even more important.

Second, the practice of budgeting is probably not as well developed in service companies as it is in manufacturing firms. In service companies, the business activity largely requires human effort, and personal services are generally performed after the orders are received. The major cost element is that of personnel, being reflected in salaries, wages, commissions, bonuses, and fringe benefits. Because of this fact, budgeting techniques are primarily concerned with planning the use of personnel and with controlling personnel effectiveness.