Usually, public budgeting entails the selection of ends and the selection of means to reach those ends. It implies the division of society’s economic and financial resources between the public and private sectors and the allocation of such resources among the competing needs in the public sector. The private sector plays complementary roles to the general public and the public sectors, especially in producing and utilizing goods and services.
The private sector generates demands for government services, thus providing critical roles in the economy. Both the public and private sectors leverage budgets as important planning tools. The public sector balances the budget while the private sector organizations use budgets in predicting operating outcomes by forecasting revenues and expenditures against profit margin.
Information facilitates prudent decision-making in any organization, both in the public and private sectors. Usually, a budget serves as a financial plan that indicates the revenues and expenditures of an organization. It is critical to provide a clear picture of how the organizations are using the available financial resources.
Budgeting allows organizations to see what financial resources are required to attain the set organizational goals and objectives. It enables corporate managers to evaluate past financial information to determine how resources have been allocated in the past, including aligning the budgeting process with the existing organizational goals. Such information forms the basis for future resource allocation in the subsequent fiscal year.
Private and public budgeting has unique characteristics. Public budgeting describes the selection of ends and the selection of means to attain those ends. Public budgeting is crucial since it helps with resource allocation based on the country’s economic and social needs. It entails determining and developing a spending plan based on the available revenues and determining the expenditure limits, thus helping to promote accountability and prioritization.
Public budgeting systems channel critical types of information concerning social conditions, including the private and public values that enhance resource allocation. Budgeting in the public sector is mostly unstable and associated with high levels of partiality.
It entails the checks and balances among the government’s three arms—legislature, executive, and judiciary. The activities associated with the plan’s strategic objectives require some strategic resource allocation to ensure successful implementation, especially in the government sector. The executive prepares and submits the budget to the legislation for approval.
Private sector budgeting describes the practices and principles that organizations in the private sector leverage to create a budget and allocate resources. Unlike in the public sector, organizations in the private sector use budgeting as a tool to predict revenue collection and expenditure of the financial sources to promote sustainability and increased profitability. The budgeting process tends to be systematic and strict.
The norm in the private sector is budget preparation on an annual basis. Developing the proposed budget entails accommodating inputs from the team members from various departments within the organizational setting. Corporate managers in different departments help develop estimates for their respective departments to facilitate seamless processes in the running and management of such an organization.