Budget Manual

A budget manual is a set of instructions used by large organizations to prepare budgets. As organizations become larger and more complex, it is no longer possible for one person to prepare a budget. Instead, budgeting across the enterprise must be carefully coordinated. Financial analysts work closely with each group to collect budget information on a pre-set schedule and then send data up through higher rungs of financial controllers until it can be aggregated by the CFO's office.

Budgeting within large organizations is an extremely complex task. Financial analysts must make assumptions about what the future will look like based on past data. This means that even the best budgeting process is subject to considerable inaccuracies. Then, as the year progresses, each group is held to a predefined budget, which may become inadequate due to changing conditions. On the other hand, some groups will find that they have more money than they require, and may choose to surreptitiously use up the "extra" budget with unnecessary expenditures in order to avoid budget cuts.

For example, the quality assurance department of the XYZ company is allowed a budget of $500,000 per year. This money can be spent on salaries, additional training, equipment and other things the quality assurance department needs. Cindy, a longtime veteran of the quality assurance department, has left the company. The quality assurance department can cover the workload and keep running just fine without her, but to ensure they do not lose part of their budget for maintaining their head count they need to hire another person and spend the remaining money that would have gone to Cindy's salary on training for the new person.