Many organizations use a combination of these methods. For example, treating all budgets as incremental but requiring a certain number of departments, divisions to justify all their expenses in alternate years. Flexible budgets are important when forecasts in certain business activities are not stable. Programs are important to measure the value added by the budget expenses to an overall business product or service. The capital expenditures budget is part of the strategic planning process, while the operational expenditures budget is part of the management control process.
Capital expenditures affect operations indirectly through depreciation.
In a top down approach it is followed by high level budgets, that in turn are broken down in divisional, departmental budgets. In a bottom up approach it is followed by departmental, divisional budgets that are consolidated into high level budgets. Both end by a top management review, modification and approval. We have already discussed the main resources planning tool - Information Architecture , in a prior class. Systems planning aims to define first what systems to be developed and then derive the resources necessary.