Resource Allocation and Budgeting
Resource allocation and budgeting are important practices during strategy implementation. Resource allocation is a process that entails distributing the available resources, especially finance, from a central position to the peripheral levels. On the other hand, budgeting is more detailed and precise. Budgeting can be defined as a process of establishing a plan on how the available resources or money will be spent. A budget is simply a spending plan that indicates the proposed expenditures and earnings or how an organization will acquire resources which include time, people and money and use them. Budgeting and resource allocation help in projecting the future costs and plans of an organization.
Why resource allocation and budgeting are important
When implementing a strategy, a major issue is how you intend to use the available resources correctly. This is where budgeting comes in. Through budgeting, you can balance your income with expenses to avoid spending more money than what you have or what you earn. If you do not do that, there will be a problem in the process of implementing your strategy. Generally, if you spend more than what you have or earn in the process of implementing a strategy, you will eventually sink deeper into debts over time. Budgeting enables you to come up with a spending plan for the money or resources. It enables you to have adequate money for all things that you need as well as for the most important things while implementing a strategy. By following a well created budget, you will avoid debts or work a way out of the current debts.
During the process of implementing a strategy, you need to plan how to use the available resources in the correct and best way possible. This is precisely why resource allocation is important. You must determine which the best way to allocate or distribute the available resources is. All business units, brands or areas cannot be given even support. However, you need a fact-based, fair and transparent approach in order to allocate the available resources sensibly. Failure to do this will lead to deteriorating motivation among employees or other forms of inefficiencies. Proper resource allocation is important because it leads to the realization of maximum benefits after implementing a strategy.
When is it done?
Budgeting and allocation of resources are mostly done at the end of a financial year or at the beginning of a financial year. At the beginning of a financial year, departments or units present their strategies for the coming year and resources that they will need to implement those strategies. As such, budgeting and allocation of resources becomes necessary to ensure that the available resources are distributed and utilized properly. Budgeting at this time also enables a business or company to make sound decisions and enhance accountability for the allocated resources throughout the financial year.
How resource allocation and budgeting is done
When budgeting, a business or organization estimates revenues in order to determine the resources that it will have for the coming financial year. On the basis of these resources, the business sets expenditure limits for each department, area or unit. This is done after considering the strategies that the unit, area or department has to implement.
Resource allocation is based on the established budget. Usually, a budget is divided into programs, units and departments for easy identification of resources that will be allocated for certain functions and programs. Every category can have numerous budget or resource allocations also called line items that are necessary in ensuring that the operations of the department are successful.
Generally budgeting and resource allocation ought to be continuous in order to monitor the budgeted resources and their uses in meeting the expenditure needs of a business. A tracking system of all orders and purchase bills is important to enhance accountability and transparency.
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