Budget

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Budget is a term that has different meanings, depending on whether it is applied to non-profit ("voluntary") organisations, commercial organisations, government, or households/family units.

Non-profit organisations[edit]

In voluntary organisations, budgeting refers to the process whereby organisations attempt to review expenditure against income, in the light of the organisation's financial position. The standard aim of a budget is to ensure that expenditure does not exceed income; but in some cases the aim may be to build up reserves, in others it may be to run down reserves (perhaps to meet some statutory requirement¹ or to ensure that a grant is fully spent), or even to run down the money held by an organisation with a view to winding it up.

Within this definition, the expenditure side of a budget has two elements: firstly, an estimate of likely known costs of items over which the organisations has little or no control, based on past experience; and secondly, a financial limit on that expenditure over which there is some control. The income side typically also has two elements: known or predictable income; and income for which there is a target. Once agreed within the organisation, comparison of income and expenditure against budget then becomes a means of financial control.

The term "budget" also applies to the expenditure permitted to a project or area of work.

Commercial organisations[edit]

In business, the term "budget" is typically used of the expenditure delegated to a particular branch or activity of the business.

Government[edit]

In government, "the budget" normally means overall proposals for raising and spending revenue, with a view to financing the operations of government and managing the economy. (See also budget balance and budget deficit.)

Government agencies may also have budgets in the same sense as non-profit organisations.

Households[edit]

In households the term "family budget" means the present balance of income and expenditure. For instance, for an individual or family seeking debt advice, the first action of a debt adviser will be to ask for a budget in the form of a statement of a statement of income and expenditure. In this the emphasis is on the expenditure, but the adviser will also explore the possibility of entitlements which may increase income.

Notes[edit]

1. In England and Wales it is illegal for a charity to retain an unreasonable level of reserves instead of applying them to charitable purposes.