Differences of Public and Business Budget Preparation Strategies

Public vs. Business Budget Strategies
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Public vs. Business Budget Strategies
Introduction to Budget Preparation
A budget is simply a list of expenses and revenues. For an individual, a budget entails the list of expenses, for example, rent, food, healthcare, entertainment, etc., and the amount of money they have earned. The same concept applies to the public sector and companies, however, there is a level of complexity involved here. The public sector and companies have long lists that involve survival and progress at the same time. Budget preparation is simply the process of developing this list. It entails difficult decisions about which demands or expenses will make it to the list. For the public sector, budget preparation entails determining which services are deemed crucial enough to be allocated a certain percentage of the revenue available. For companies or businesses, budget preparation entails making plans for the future and determining how much profit will be made. The key difference between the public and business budget preparation strategies is in the fact that the former is trying to balance its budget, while the latter is using its budget to predict the future and steer the trajectory of the business towards the actualization of that future.
One of the differences between the public and business budget preparation strategies lies in the purpose of the budget. For the public budget preparation strategy, the goal is to try and fund the many services that the public sector provides to the people. So, the entire process entails finding ways to provide as many services as possible to as many people possible as possible. It is crucial to mention that, for the public sector, budget preparation is greatly affected by demographics. While preparing their budget, the public sector has to consider the different characteristics of people and their needs. These guide or dictate the number of services that make it into the budget because the goal is to reach as many people as possible. For businesses, the goal of budget preparation is to make sure that businesses use as little revenue as possible to make as much money as possible. According to Seelos and Mair (2007), every business strives for consistent profitability, and if increased costs hamper this profitability, then those costs are cut off and reduced to as little as possible. A budget helps to actualize the above for businesses. The same does not apply to the public sector.
The second difference between public and business budget preparation strategies lies in the fact that the former seeks to use all or most of the available revenue. On the other hand, the business budget preparation strategy seeks t...