Operational and Financial Budgeting Budget Research Paper

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While additional sales might be classified as a relatively 'happy' change in circumstances, budget overruns are a more common unexpected occurrence. Budget overruns can occur for a number of reasons -- unforeseen technological or weather problems, bureaucratic red tape and delays, or a sudden rise in input costs. To ensure that such excesses are allowed for, it is a good idea to have as realistic a view as possible of the overall project, and plan for the possibility of cost overruns. For example, budget overruns are endemic to certain professions, such as the defense industry and construction, and it would be unrealistic to assume that every project will meet its budget target in these industries.

When forecasting, the likelihood of overruns should be assessed, using similar projects in the past as a point of comparison.

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Approval of overruns is more likely if the excesses are planned for and shown to be due to external environmental changes, rather than rooted in the incompetence of the project manager. But no matter how inevitable cost overruns may be, it is still essential that controls are put in place to reduce the risk of shortfalls. Having short-term goals for each stage of a project will enable delays to be spotted early on, and allow the project to potentially make up for lost time during its later phases. Frequent meetings and facilitating communication between staff improves project coordination efforts and ensures that the legal, human, and technological aspects of the project are moving forward as planned, in a joint effort......

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