Budget Planning - Assignment Example

Budget Planning of Over Budget and Under Budget Although many people assume that running under budget only has positive effects and implications on organizations and individuals, it has numerous negative effects and insinuations as has over budget. First, the goodness or badness of under budget stems from the reasons for which an entity has performed under budget. First, an under budget could imply that an organization lacked enough labor to do the forecasted work, meaning the scheduled work is in peril and the most likely course of action is to go over budget to hire more people to complete the forecasted job (Lewis, 2010).

It is thus important that organizations compare the work completed with its objectives rather than merely analyze budgets on calendar basis. For instance, one may spend 90% of the allocated resources in doing a shoddy work or completing only 80% of the stipulated work, notwithstanding that the spent amount may fall within the projected calendar period. One could also run under budget on calendar basis. That is, the same proportions of the budget and work may be covered as expected while running under budget on calendar basis due to delays and breaks.

The implication here is that there could have been slips in work schedule. While under budget implies that one performs below the planned budget, over budgets means that the planned budget has been surpassed. Proper planning and implementation of budget would thus lead one to as close to the budget as possible (Barr & McClellan, 2011). Excessive under budget could therefore suggest a situation in which one did not spend enough in specific areas to grow and protect business or establish a project.

On the other hand, constant over budget performance could suggest that one is in danger of running out of resources and business. It is thus vital that work is done as planned to avoid both under and over budget both of which have their negative effects and implications on task implementation and completion (Article Library, 2012). ReferencesArticle Library (2012). “Budget Planning.” Retrieved on August 15, 2012 from http://www.careonecredit.com/knowledge/budget-planning.aspxBarr, M. J., and McClellan, G. S. (2011).

Budgets and financial management in higher education (Jossey-Bass higher adult education), second edition. Jossey-Bass; Lewis, J. (2010). Project planning, scheduling, and control: the ultimate hands-on guide to bringing projects in on time and on budget, fifth edition. McGraw-Hill.