Performance Budget Management
Performance budget management is the process of administering and managing financial resources committed to achieving an organization’s performance goals. It is the Link between financial performance and organizational goals and encompasses the flow of financial resources, their use to achieve the organization’s objectives and the evaluation of their success.
In performance budget management, focus is on understanding and establishing the value of activities and programs in terms of the target performance indicators. Once the activities and programs are evaluated, resources can be allocated to those which provide the most value to the organization. This includes the costs associated with these activities and programs, as well as assessing the optimal combination of fixed and variable costs for the organization. This approach also allows for more effective budgeting, as the most effective use of funds can be identified and allocated accordingly.
Performance budget management allows organizations to identify and maximize efficiencies by tracking the cost of activities and programs, as well as assessing their effectiveness in meeting organizational performance goals. This helps to ensure that financial resources are allocated to activities that will achieve the desired performance goals, while also ensuring that financial resources are not wasted.
In traditional budgeting practices, resources are divided into predetermined categories based on broad activities and programs. This type of budgeting typically results in excessive spending and activities that may not be necessary to meet organizational performance goals. By incorporating performance budgeting, organizations have greater visibility into the cost and effectiveness of each activity and program, and can make more informed decisions about how resources should be allocated.
Performance budget management also helps to ensure that organizations remain accountable for their use of funds. Performance objectives and performance indicators can be tracked to measure success, and any deficiencies can be used to identify areas for improvement. Furthermore, performance budgeting provides organizations with the feedback necessary to make timely decisions to ensure their goals are achieved.
Performance budget management is a critical component to ensure that an organization meets its performance goals. By incorporating this type of budgeting and tracking practices, organizations can ensure that financial resources are allocated to activities and programs that will achieve the most value, while also reducing the chances of wasting resources. Ultimately, performance budget management results in greater efficiency, accountability, and overall success.
