Question

Explain the basic principles and tools of budget and resource management

Answer 1

Budgeting and resource management are two different functions which are evolved in each other. A budget is a framework within which the decisions on the inflow of finance into the organization and its outflow as expenditure on real resources are planned, implemented, recorded and reported.

An organization's budgets are typically based on three principles:

1. Planning: A budget is a key instrument by which an organization decides what it is going to do in the future and how it is going to finance the resources required.

2. Financial Control: Financial control refers to the processes by which the receipt of revenues and outflow of expenditures are recorded, monitored and adjusted to ensure that the budget is managed honestly, efficiently and effectively.

3. Accountability: The financial records are also the means of ensuring and demonstrating that money has been spent for the purposes intended. Probity is satisfied so long as the money has not been spent fraudulently or wastefully.

Resource management is a link to establish the best relationship between budgeting and organizational effectiveness. Factors to be considered and very important in resource management are such as distribution of power, organizational culture, differing subjective interpretations and ambiguity about means-end relationships, etc.

How budget is managed is an important element of good organizational effectiveness. Resource management and budgeting together form a vital link between strategy and quality.