A budget manual is a document that sets outstanding instructions governing the responsibilities of persons and the procedures, forms and records relating to the preparation and use of budgets and it is a booklet containing standing instructions regarding the procedures to be followed and the time schedules to be observed.
The following are some important matters dealt with in the budget manual:
- The dates by which preliminary forecasts and plans are to be submitted;
- the form in which these are to be submitted and the persons to whom these are to be forwarded;
- the important factors that must be considered for each forecast or plan;
- The categorization of expenses, e.g., variable and fixed, and the manner in which each category is to be estimated and dealt with;
- the manner of scrutiny and the personnel to carry it out;
- the matters which must be settled only with the consent of the managing director, departmental manager, etc.;
- The finalization of the functional budgets and their compilation into the master budget;
- the form in which the various reports are to be made out, their periodicity and dates, the persons to whom these and their copies are to be sent;
- the reporting of the remedial action;
- the manner in which budgets, after acceptance and issuance, are to be revised or amended; and
- the matters, included in budgets, on which action may be taken only with the approval of top management.
The main idea behind the budget manual is to inform line executives beforehand about procedures to be followed rather than issuing frequent instructions from the controller’s office regarding procedures and forms to be used. Such frequent instructions can be a source of friction between the line and staff management