Introduction to Budget Preparation

Budgeting Processes in the Commercial and Public Sectors

Budgeting processes differ significantly in the commercial and public sectors. The distinctions further define the budgeting process, down to the exact steps and accounting rules to be followed throughout the process. The changes, however, do not diminish the importance of the budgeting process in any government organization’s attainment of its goals. Budgeting is crucial in establishing accountability during the utilization of funds provided to an organisation (Shafritz, Russell, & Borick, 2015). It helps in the creation of efficiency in the utilization funds as well as the achievement of specific objectives of a firm. Budgets play a great role in shaping the future of specific entity. Most budgets in private entities are geared towards the attainment of a profit whereas those in public entities are mainstreamed to achieve efficiency in the provision of social services.<\/p>

The Preparation of Budgets in Private and Public Sectors

The preparation of the budgets in both private and public sectors also differ greatly. In the public sector, governments seek to raise funds from taxes on individuals as well as companies. Funding also arises in the form of interests for assets that a government owns. Taxes form one of the biggest sources for public entities (Rubin, 2016). Taxes symbolize the amount of money an individual or a firm pays for social services offered by the government. Taxes are aimed at ensuring the governments acquire needed resources need to provide social services. Taxes are compulsory and therefore provide a very effective way for governments to raise finances. Fees also contribute a significant portion of public funding. Fees are described as the costs of rendering certain special services by the government.<\/p>

Operating and Funding Sources of Public Revenue

A thorough budget preparation process facilitates the development of a workable and feasible proposal. Any preparation must take into considerations the macroeconomics and microeconomic environments for its success. The budgeting process should be highly diligent, stringent and accountable. Planners and economists must be aware that budgeting is a direct description of a government\u2019s commitment to its people. The process must ensure effective means of resource allocations with an emphasis on specific policy priorities. The planners must also allocate expenditures that are consistent with other external factors such as macroeconomic constraint. Efficiency in the implementation of a budget is highly essential. The public entity must aim at achieving efficiency in the utilization of its funds as well as the provision of essential social services to the public (Shafritz, Russell, & Borick, 2015). Unnecessary costs must be effectively eliminated as well as minimization of wastage. The time limitation of the budget is an essential part of the budgeting process.<\/p>

Annual Budgets and Multi-Year Strategies

Governments are increasingly adopting annual budgets. However, this annularity does not hinder the development of multi-year strategies for economic progression. The government must undertake prioritization as well as tradeoffs to achieve its policies. The most cost effective options are then selected with the aim of achieving operational efficiency for the whole process. This is achieved through the setting of realistic revenues that are compatible with expenditures (Rubin, 2016). This assists in defining the macroeconomic function of budget. Strategic allocation of resources is also essential in establishing of the specific areas in an economy to have the greatest potential of producing revenue.<\/p>

Effects of Demographics on Public Revenue Services

Demography plays an important role in determining the effectiveness of public revenue service. Demography is an essential consideration in determining the location of public finance for different uses. In a society affected by drug abuse, for example, the government allocates its funds to fight this menace as well as develop rehabilitation programs. The demographic characteristics of a population, therefore, have a huge impact on the way a public entity allocates its revenues. In areas with high economic potential, the government can engage in availing of necessary resources with the aim of providing an enabling environment for business. Age which is an essential demographic characteristic of any population exerts and directs how public revenue is distributed. In an aging population, the government undertakes massive investment of its resources in caring for its elderly. There is a significant reduction in the amount of revenue collected by the government as many elderly consume nontaxable services and many do not have the existing income. These populations are also affected by a reduction in the number of people available for active labor.<\/p>

In an area where the majority of the population includes the youth and young adults, the government invests most of its resources in education. It also allocates resources for the creation of business friendly environments to help people establish their own businesses. This is highly prioritized since it provides the potential for revenue in the future in the form of taxes. Demography, therefore, plays a significant part in the allocation of public revenue. It further determines how the government supplements its revenue through borrowings with the aim of supplementing on its tax collections. A government whose population consists of the elderly rely heavily on external debts and supplement its imports\u2019 labor from other countries.<\/p>

References

Rubin, I. S. (2016). The politics of public budgeting: Getting and spending, borrowing and balancing. Thousand Oaks, CA: CQ Press. Retrieved from https://books.google.com.ua/books?id=ohDiCwAAQBAJ&dq=Rubin+The+politics+of+public+budgeting:+Getting+and+spending,+borrowing+and+balancing.+read. Accessed 7 july, 2017.

Shafritz, J. M., Russell, E. W., & Borick, C. (2015). Introducing public administration. New York, NY: Routledge. Retrieved from https://books.google.com.ua/books?id=8fIvCgAAQBAJ&printsec=frontcover&source=gbs_ViewAPI&redir_esc=y#v=onepage&q&f=false. Accessed 7 July, 2017.