An administrative budget is a financial plan for non-production costs in a business for an accounting period. It is crucial to control budgets to avoid eating into profits and to protect shareholders. The budget can vary depending on the company, and some organizations must disclose it. Planning an administrative budget can take weeks or months, and growing costs can become a problem over time. Staff must determine how to cut the budget effectively to increase efficiency and reduce costs.
An administrative budget is a financial plan for the administrative side of a business for an accounting period such as a quarter or a year. Includes costs not directly associated with the production of goods and services. Controlling budgets is critical for businesses of all sizes, as a large budget can eat into profits and make it difficult for a business to grow. If a company is publicly traded, it also has an obligation to protect shareholders with a reasonable budget, and in some cases, companies may have a legal obligation to disclose administrative financial statements.
This document contains a detailed breakdown of projected support operations expenses related to the business, ranging from legal services to secretarial payroll. The administrative budget defines a number of departments and their functions and discusses the allocations of funds available to them. The size of this budget can vary, depending on the company; some companies have very high associated overhead costs, while others have costs concentrated directly into production.
Some organizations are required to disclose their administrative budget. In governments that value transparency, this document is available for taxpayer review and people can submit comments. Publicly traded companies must discuss the budget in annual reports and other statements. Similarly, registered charities need to demonstrate how they use their funds, and a large administrative budget can be a deterrent to donors who want to see the majority of their funds focused on delivering goods and services to those in need.
Planning an administrative budget can take weeks or months. The company must be able to anticipate costs as accurately as possible and can determine factors such as inflationary spikes. Sets goals for the accounting period and can discuss them in the budget. For example, the legal department’s budget might expand because a company is preparing a new product that requires legal advice, so the expenses are justified. If a company cannot explain a sudden jump in administrative expenses, this could represent communication or efficiency issues within the company’s administration.
Accountants, analysts, and others may consult a previous period’s administrative budget for information. Growing increases in administrative costs tend to become a problem over time, and sometimes these budgets become inflated. In these situations, staff must sit down to determine how to most effectively cut the budget to meet administrative needs, while refocusing funds to other purposes. This could include departmental restructuring and other measures to increase efficiency and reduce costs associated with administrative activities.
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