Budgeting process
The budgeting process translates objectives and assumptions into coordinated operational and financial plans. It normally identifies the limiting budget factor, gathers relevant data, prepares functional budgets, negotiates and reviews proposals, and consolidates an agreed master budget. Responsibilities and deadlines should be clear. The sequence depends on the main constraint: a demand-led business may start with sales, while scarce production capacity can determine what can be sold.
Worked example
A company identifies market demand as the key factor, prepares sales first, then production, material, labour and overhead budgets, and finally cash and the budgeted statements.
Common mistake
Do not prepare departmental budgets independently without checking whether their volumes, dates and resource assumptions agree.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| ACCA | PM | Direct | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |