financial management information system - National Food Service ...

S ECTION 5BUDGETINGA budget is a formal written statement of managements plans for a specified period of time, expressed in financial terms. Itcharts the course for future action. Budgeting embraces both accounting and management functions. It is a managementfunction because it is a plan that will be used to assist in managing the operation. Budgeting requires management to planfor decision-making, establishing objectives, and setting priorities. Budgeting is also an accounting function because theplans are translated into financial terms. Probably no other instrument contributes more directly to effective managementthan a budget.The budgeting process for the school foodservice operation is more similar to private enterprise operations than to otherfunds in the school district. School foodservice is a businesslike operation in which direct services are provided toconsumers and must be financed, at least in part, through the sale of products and services. Although revenues for schoolfoodservice come from a variety of sources — local, state, and federal — almost all are tied to customer participation.Budget preparation requires substantial time and effort on the part of the school personnel involved in the process. Becauseof the time involvement, it is important for the school foodservice administrator to understand the managerial uses of thebudget as well as the specific procedures and techniques for the successful preparation of a budget. To develop a workableand accurate budget, the school foodservice administrator must understand (a) the benefits of preparing a budget, (b) thefactors that influence budgeting, (c) the methods of budgeting, (d) the budgeting process, and (e) how to analyze and adjustthe budget.Benefits of Preparing a BudgetA budget is central to the successful operation of the school foodservice program. The budget forecasts the amount ofrevenue that will be available, determines how it will be allocated for expenditures, and predicts how much money will be inthe fund balance at the end of the closing period. The budget is a financial management tool that can be used to:• establish specific future goals,• evaluate past activities in relation to planned activities,• prescribe the formulation of work plans,• forecast the amount of revenue that will be available,• predict how funds will need to be expended,• measure actual results against planned or desired results,• identify potential problem areas that need attention,• estimate what will be available at the end of the budget period, and• serve as a public information system.N ATIONAL F OOD S ERVICE M ANAGEMENT I NSTITUTE 80