Budget Preparation

Abstract
Budgets are necessary to account for income and expenses in business, government, and personal lives. This paper will present budget preparation steps in relation to public and business preparation strategies. The reader will be introduced to the operating and funding sources of public revenue and the paper will establish the effects of demographics on public revenue services.
Budget Preparation
Budget preparation involves a process by which governments, organizations, and individuals create and approve a budget. The process is generally recognized and controlled by a governing or legal agenda. There are several steps in the preparation phase of a budget; 1) aligning goals, 2) listing incomes and expenses, 3) outline needs and wants, 4) creating a budget, 5) situating a plan into action, 6) additional expenses, and 7) predicting results.
A budget begins by deciding upon the financial goals of future income and expenditures in order to streamline the process. In order to be successful, the budget must be well-written, adaptable, accurate, and plainly communicated. Both private and public entities use the budget process in development and calculating budgets. While private firms use budgets to forecast operational results, the public sector coordinates expenses on authorized resources and amenities with proofs of purchase of public money such as taxes and fees.

Public vs Private Business Preparation Strategies

Businesses owned and operated by administrations, such as community hospitals and institutes, public lodgings, and public libraries are planned with taxpayer dollars. A dilemma for many public sectors is how to meet citizen’s requests for services while at the same time lessening levies, fees, and expenditures (Lee, 1992). Governors and their accounting staff are presented with sundry procedure choices during the groundwork stage of the budget process.
Planning budgets is necessary for public and private sectors. Preparation stratagems differ for both. Business budgets tend to follow transactions progress during a time period and weigh how effectively new targets were met. A businesses’ currency budget follows the amount of cash coming in and going out during a time period and likens it to objectives for that time frame. There is an essential difference in the aims of business strategy and public strategy. A business is directed by the revenue drive thereby increasing profits and prosperity for personal benefits, whereas public strategy supports societal benefits.
The public sector consists of three types of budgets; balanced, surplus, and deficit. These budgets precisely echo the services being delivered and diminish discriminations as much as possible through restructuring of income and wealth. Many state and local municipalities’ budgets include an operating budget for frequent spending items or a principal budget for revenues and spending on assets such as buildings, equipment, and organization.
Public as well as private businesses begin the preparation phase months in advance. Managers and sector heads champion together to develop goals and initiatives. Likewise, a governor, mayor, or city administrator will dispense his or her budget priorities along with directives and expectations to others in order to formulate their budgets based on spending needs and priorities.

Operating and Funding Sources of Public Revenue

Private business relies on profit, whereas public agencies rely on revenue for operation and funding. Some of the types of funding sources come from individual income taxes, payroll taxes, and corporate income taxes. Other operating and funding sources include excise taxes, estate and inheritance taxes, and fees. Approximately 45% of national tax income comes from citizen personal income taxes and 39% comes from social security and Medicare withholdings (Davies, 2010). Whereas the public sector relies on taxation, the private sector relies heavily on product sales, service fees, advertising sales, data access fees, and commissions generated from other sources.
Public revenue helps sustain the resources required for these activities. Public revenue is classified for ease into three categories; direct revenue from railways and highway fees, derivative revenue from the public such as taxes, fees, fines, and penalties, and lastly, anticipatory revenue from sales of bonds and other commercial revenue sources. The sources by which government earns its income is tax revenue and non-tax revenue (Darshan, 2014).

Effects of Demographics on Public Revenue Services

Fiscal cycles such as a waning in revenue, especially sales and income taxes are more intricate to demographics on public revenue amenities. During a recession, private and public revenues take a big hit, thus intergovernmental aid dispensed to area governments may decline. Inflation affects uncertainty in government when the cost of living spikes. Interest rate changes affect budgets especially when the federal government is forced to borrow continuously raising the federal deficit. Opposition with public sectors for new populations or business venture wields a commercial effect on area planning (ICMA, 2016).
Societies with decreasing populations have struggle in a lessening of expenditures resulting in economic responsibilities issues. Age distribution of populations affects public education, safety, and recreational activity spending. Growth in personal income of residents affects the size of private and public governments. Higher-income families demand higher quality services requiring governments to look for other areas to create revenue. This alteration has a major effect on budget allocations and the size of private and public agencies (ICMA, 2016).

Conclusion

Public and businesses use budgeting to account for income and expenses, as well as distributing or allocating funds across several departments. Preparing a budget takes time and is thought-provoking, well-written, and balanced. Preparation strategies are different for both public and private sectors, but the mission is the same. Businesses are generally guided by the motive to earn profits via product sales, whereas the public sector generates income or revenue through taxation of citizens and businesses. Several demographic factors affect the budgeting process, for instance, inflation, recession, population change, age distribution, and personal individual income all factor into balancing a budget for a fiscal year.
References
Davies, A. (2010). Where does the government get the money? Government Spending 101. George Mason University: Mercatus Center. Retrieved from https://www.mercatus.org/publications/government-spending/where-does-government-get-money-it-spends
Darshan, J. (2014). Public revenue: public finance. Economy & Finance. Retrieved from https://www.slideshare.net/DarshanJoshi5/public-revenue?next_slideshow=1
ICMA. (2016). 4 Factors Influencing Local Government Financial Decisions. Retrieved from https://icma.org/blog-posts/4-factors-influencing-local-government-financial-decisions
Lee, R. (1992). The use of executive guidance in state budget preparation. Public Budeting & Finance. 12(3). p. 19-31. Retrieved from http://eds.a.ebscohost.com/eds/pdfviewer/pdfviewer?vid=2&sid=13bb4460-761d-45d3-bf2c-b124201986ec%40sdc-v-sessmgr02
            

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