BUDGETING TECHNIQUES (SYSTEM)

BUDGETING TECHNIQUES (SYSTEM)

Public finance in Nigeria by Ugwu Monday J. of Okereke (2003) discussed about budgeting techniques or system. Budgeting control techniques are now a result of continuous comparison of actual results with operations. In addition, budget estimates need checking and revising when necessary. Successful budget control requires careful analysis of both actual result and budget estimates in the business organization, budgeting techniques represents the mechanism adopted in budget preparation. Among these techniques or system are:

1. ZERO BASE BUDGETING (ZBB): This is a techniques of budget preparation where all activities of the business is prepared i.e. it assumes that references are not made to past or previous data. In zero budgeting everything starts newly, meaning that nothing of the past activity exists. This can be seen in a newly established industry.

2. PLANNING, PROGRAMMING BUDGETING: This is a method of budget preparation that lays emphasis on a particular program to be executed for the period before its budget preparation.
3. TRADITIONAL BUDGETING: This is the most common method used in budgeting preparation, this techniques makes preference from past data or an activity, which believes that previous data exist, it becomes a basis for the next budget preparation.
4. PERFORMANCE BUDGETING: This method lays emphasizes on the performance of a particular periods before embarking on a new budget. For example, a firm budgeted for a profit of eight million naira with expenditure proposal of 4.5 million naira. If this is achieved, he can now decide to improve on the performance by budgeting for twelve (12) million naira. These techniques emphasize that budget are prepared based on the performance of previous budgets.
5. SUM – set Legislation: This is a system where bye law are made to stop further expenditure on certain programmes that have outline their usefulness pending a reconsideration of the important for further implementation. It is similar to zero base budgets based on rotation and emphasize on cordial relations between the legislature and the executive.