Continuous improvement, planning and budgeting

The continuous improvement approach to management is based on the idea that if opportunities to improve are identified and incorporated into subsequent plans, overall performance is likely to improve. The continuous steps of confirming objectives and measures, planning, acting and evaluating are sometimes called the ‘management cycle’.

Budgeting is also a cycle (within the overall management cycle). The budget cycle comprises a set of steps that can be summarised as:

·     confirm the organisation’s financial objectives

·     agree to key measures that are likely to contribute to the achievement of financial objectives/outcomes, and

·     prepare budgets that are likely to achieve the agreed objectives/outcomes.


·     undertake activities and transactions according to the plans and budgets

·     compare actual performance with the budgets and key measures

·     identify opportunities to improve performance

·     confirm the organisation’s financial objectives

·     repeat the cycle continuously.

The Budget


The benefits of integrating planning and budgeting

In particular:

·     budgets can serve as a means of communicating plans to the people in
the organisation

·     the process of developing budgets allows participants to plan for the future

·     budgets can provide a framework for prioritising competing plans

·     budgets can draw attention to limiting factors and bottlenecks that require
careful planning

·     seasonal factors can be built into budgets

·     budgets can coordinate the activities of the organisation by linking the plans of the disparate parts

·     budgets can serve as benchmarks for evaluating actual against
planned performance

Budgeting can support the delegation of authority and responsibility for completing planned work in the organisation operating plans and budgets can provide a number of benefits to the organisation.