Page 110 - Accounting Best Practices

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5–13 Issue a Budget Procedure and Timetable
Exhibit 5.3 Budget versus Actual Report 99
Description Spent Year-to-Date Full Year Budget Budget Remaining
Auto $ 42,000 $ 80,000 $ 38,000
Building Repairs 100,100 150,000 49,900
Insurance 53,000 55,000 2,000
Interest Expense 12,000 24,000 12,000
Maintenance 39,000 41,000 2,000
Office Supplies 5,000 7,000 2,000
Telephones 14,000 20,000 6,000
Travel 18,500 19,000 500
Utilities 21,000 30,000 9,000

In this situation, it is best to forewarn managers over the course of the year by
issuing a simple report, such as the one shown in Exhibit 5.3, that lists each
expense item, the year-to-date amount spent, the full-year budget, and the amount
left to spend. This information allows managers to know the exact amount avail-
able for their use and generally avoids this problem of people running out of
money at the end of the year.
Cost: Installation time:

5–13 ISSUE A BUDGET PROCEDURE
AND TIMETABLE

The typical budget dies a lingering death. It is not issued on time, nor is the first
issuance likely to be the last one. Instead, there are a multitude of last-minute
changes that force the budget process to continue into the next year. As a result,
the budget may not be usable as a basis of comparison for new year results for
several months.
The best solution to this problem is to issue a tightly structured budget pro-
cedure to the organization, along with an accompanying timetable, that specifies
when all activities will occur, who will complete them, and when a deliverable is
due back at the budget manager’s office. By laying out the process in this manner
and following up closely on all due dates, it is possible to issue a complete budget
on time, every time. A good budget procedure should include the following steps,
at a minimum:

• Benchmarking comparison. Though rarely used in a budget, it is extremely
useful to conduct a benchmarking comparison of corporate performance