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11. Controlling Budgets

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Transcript

Welcome to our section on budgetary control techniques. In this section, we will be describing budget drivers. Understanding what drives the budget, the expenditure or income will often provide the reason for the variances that arise. Budget drivers can also assist in the development of the budget in the first instance. There will also be lectures on how to calculate projected downturns different budget control actions that can be taken and the importance of monitoring outcomes. fatties are the objectives for your budget been achieved.

All these techniques should be part of a budget holders toolkit. Such an A can really undertake effective monitoring and control about the driver is aspect of the service that drives income or expenditure. In many cases for services, this is related to the cost of labor. For example, the number of hours or days required to deliver the service. However, the budget driver tends to be a variable rather than the fixed cost. Again, for example, in the case of labor, this will be temporary or contract staff.

Full time employees who salaries are paid regardless of service level should be seen as an overhead costs. As such, they will not drive overall costs up or down as they will not change. Some examples of budget drivers are given as follows. The number of clients may drive certain costs associated with them. For example, hospital patients require meals, clean sheets, laundry, etc expenditure on designing will increase with the number of clients. The number of hours may drive costs, especially where the input cost of the service can be calculated on an hourly rate.

For example, if the cost of opening a library is stated as a rate per hour, then the longer the opening hours, the greater the cost. hourly rates are particularly important when using temporary agency or contract staff. The more hours used, the greater the cost. The usage of staff time may be driven by another aspect of the service, for example, the number of clients, number of visits, number of interviews, number of inquiries and so on. These examples reflect activity levels which drive costs and are often associated with demand. One of the control actions we will discuss later will consider how a budget holder can manage demand projects can Also be seen as a budget driver, as a project usually has its own budget along with targets.

For example, if a project is time related and there is a delay, this may have a direct impact on expenditure or income related to the project. income is also affected in the same way as expenditure, with the number of customers often being the key driver. For example, if the government charges a fee for passports, the level of income achieved will depend on how many passports are issued, which may be very difficult to predict. Give some consideration to your own budget and think about what really drives the items of income and expenditure within it. We will be giving some more detailed examples in the next lecture.

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