Private versus Public Budget Preparations


Write a paper in which you compare public and private budget preparation strategies. Make sure to include:
?Introduction to budget preparation
?Operating and funding sources of public revenue
?Effects of demographics on public revenue services

Sample paper

 Private versus Public Budget Preparations.


A budget refers to a financial tool that is used to reflect the costs and revenues of a business in the future. An institution regulates the budget by exercising financial control. Budgets for revenue, expenditure and income are usually prepared before and then compared with the performance of the business in order to check for any variances. The main purpose of preparing a budget is not only to keep check of the finances but also to offer guidelines to policymakers that help them to determine whether certain budget proposal are desirable or feasible in either microeconomic or macroeconomic point of view. Public expenditures by the government are easier to account for during the preparation of budget than during the execution phase. Budget advisors and economists should pay attention to the underlying structure in which the decisions concerning the budget are made. In addition to this, they should establish whose responsibility it is to plan and prepare the budget, the steps to follow and how any changes about the budget should be implemented. Good management of public expenditure is only made possible by always having a good budget in place (, 2016).

The process of budget preparation involves individuals and organizations whose responsibilities should be carried out in a given time. There are regulatory and legal structures that are to be followed in order to control this process. Budget preparation process and execution follow some procedures which are common in most countries or organizations. There are standards that are accepted internationally known as budget principles which should be reflected in every country’s budget.  There are different rules that govern the process of budget preparation in every country that define the elements of the budget and those responsible for each one of them.

Comparison of the public versus private sectors budget preparation strategies.

Budget preparation process for public sector and the private sector differ fundamentally. These differences are evident in the processes, accounting starategies and the purpose of the budget. The goal of any financial manager in the private sector is to increase the company’s profit margin.  They always aim at surpassing or at least attaining the profitability at the minimum level. In the private sector, the financial managers have a mandate to oversee growth in the company and hues they are given power or authority to help them in reaching the farthest they can using the available resources. On the other hand, budgets in the private sector should show accountability and proper use of public resources which are mostly raised through tax revenue. Most of the resources are used to build infrastructure and offer public services to the public. The purpose of the public sector is not to make profit thus the managers should ensure they are efficient in expenditure (, 2014).

The decision making processes for the two sectors also differ.  Decisions are made at the top managerial levels in the private sector and they implemented down the chain. This means that the effectiveness of the decisions is fast and produces results. In the public sector however, there are the several things to consider before arriving at a certain decision. Public participation is encouraged and their views are considered. A public budget should therefore be flexible in order to accommodate the interests of the stakeholders involved. Financial managers in the private sector are faced with more strict rules of accounting while preparing budgets than those in the public sector. They are required to follow the Generally Accepted Accounting Principles (GAAP) but those in the private sector do not necessarily need to follow them lastly, budgets in the two sectors differ in terms of context. In both sectors, the budget should show vision and creativity but these are reflected in different ways for each one of them. Private sector budgets require the financial managers to be fast, aggressive and respond to issues quickly in order to always make profit. On the other hand, financial managers in t e public sector should be diplomatic and ensure there is flexibility in the budget and that everyone’s views are considered.

Operating and funding sources of public revenue.

There are two sources of public revenue. These are tax revenue and non tax revenue. These sources ensure that the government has enough financial resources that are necessary in order to provides services to the public. Tax revenue is generated through the various compulsory taxes imposed by the government. These include value added tax, resources tax, business tax, land value added tax among others. Non Tax revenue is generated through gifts, grants, profits from states resources and administrative revenue.

Effects of demographics on public revenue services

The effects of an aging population heavily implicate the budget. This means that the funds allocated for social security to cater for people during their old age and cater for health insurance continues to increase. a huge amount of the gross domestic product caters for these factors and the figures keep on increasing. A big or growing number of dependent section of the population means that tar revenue continues to reduce while at the same time some funds are allocated to cater for this group. The improved life expectancy rates shows that those who retire will enjoy retirement benefits for a long time. a reduced rate of birth means that there are few people entering the workforce to support those who retire by way of being productive or paying taxes.

References,. “Guidelines For Public Expenditure Management–Section 3–Budget Preparation”. N.p., 2016. Web. 16 July 2016.,. “Public Sector Vs. Private Sector Budgeting | Online MPA | USF”. N.p., 2014. Web. 16 July 2016.


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