The Budget in Business

• Date: 01 May 1924
• Author: Arthur Lazarus
• DOI: 10.1177/000271622411300109
• Published date: 01 May 1924
• Subject Matter: Articles

56
THE ANNALS OF THE AMERICAN ACADEMY
When the review of estimates sub-
He is given definite letters of authority
mitted by the district foresters is
and written statements of the limita-
complete and the Departmental Ap-
tions, demands and policies under which
propriation Bill has been passed by
the year’s work is to be conducted.
Congress, the processes of budget ap-
In the carrying out of his approved
proval begin. First the forester makes
budget each officer is subject to close
an allotment to each district forester,
supervision and inspection on the
after which details and adjustments
ground. This inspection serves a
are worked out by each district forester
double purpose. It supplies guidance
,
and approved sheets are forwarded to
to the local officer from a qualified man
the supervisor. Finally the district
of wider experience. It also keeps the
ranger is informed just what men he
officers charged with responsibility for
can employ, the approved period of
general control of budgetary plans in
employment for each and how much
close touch with the exact conditions
money he has for improvement proj-
encountered in carrying out the plans
ects, travel expenses, purchase of sup-
and thus avoids the destructive tenden-
plies, etc., during the coming fiscal
cies of a system of centralized control
year. Each office in the chain is in-
over operations about which the con-
formed how much he has to spend and
trolling agency lacks intimate knowl-
for what purpose he may expend it.
edge.
The Budget in Business
BY ARTHUR LAZARUS
In charge of Business Management Service, Policyholders’ Service Bureau,
Metropolitan Life Insurance Company
THIS article will
forded me to test out this interest. As
1
Comment briefly on the present
chief of the Cost Accounting Bureau of
interest in the budget;
the United States Chamber of Com-
2. Show how the budget may be
merce, a pamphlet was prepared, Budg-
applied to a variety of com-
eting for Business Control, for which re-
mercial enterprises, and
quests for some 10,000 copies were
3. Develop such distinctions, if
received. A year or two later, three
any, which may exist in the
budget leaflets, prepared for the Policy-
budget applied to business as
holders’ Service Bureau of the Metro-
distinct from the budget in
politan Life Insurance Company, devel-
government.
oped requests for some 52,000 copies,
while scores of companies in particular
I-PRESENT INTEREST IN THE BUDGET
industries asked for the specific budget
TO A DEGREE NOT ORDINARILY
studies issued by the foregoing bureau.
APPRECIATED
To date I have either personally de-
The successful operation of the Fed-
veloped or there have been submitted
eral Budget, coupled with the dramatic
to me budgets applicable to the follow-
value given it by General Dawes, have
ing industries:
developed a widespread interest in the
Garment
Ice Cream
budget applied to business.
Newspaper
Department Store
Two opportunities£have been af-
Hotel
Banks

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THE BUDGET IN BUSINESS
57
Railroad and Public Construction and
A-HOW
A RAILROAD BUDGETS
Utility
Contracting
1.
Mines
Retailing
Budget of Revenues and Expenses
Optical Instruments Metal Products
It is the practice of a large railway to
Farm Implements Insurance Companies
compile a detailed forecast of prospec-
Dairy Products
Paper
tive earnings, expenses, taxes, etc., by
Chemical Products Electrical Products
months, by means of which some rea-
Washing Machines Ice
sonably accurate idea may be obtained
The foregoing is
of the net results to be
a sufficient selection
expected for the
to indicate the wide appeal of the
year. Information necessary to com-
budget, and yet I
pile this
am
confident that the
budget or forecast is furnished
application of the budget to business
by the various departments concerned
has
and is
just started.
based upon past experience as
well as the present conditions and fu-
II-HOW THE BUDGET MAY BE AP-
ture outlook. After considerable study,
PLIED TO A VARIETY OF ENTER-
this forecast in consolidated form is
PRISES
submitted to the president for ap-
So often business men have stated
proval. Naturally, unforeseen condi-
that the budget could not be applied to
tions during the year may require an
their enterprise because of its peculiar
entire revision of the forecast.
nature.
Strangely enough, this opin-
2. Construction Budget
ion is frequently given when, so to
In conformity with the increase in
speak, the competitor down the block is
business which
successfully using the budget principle.
may naturally be ex-
The
pected as the result of the growth of the
more a business fluctuates the
country served, the railway has a fur-
greater is the need for the budget, for
ther
where
yearly budget which covers pro-
a business runs more or less on
posed expenditures for improvements,
an even keel planning becomes auto-
additions and betterments, in the
matic and takes
way
care of itself.
Unless
of new motor
business becomes
power, cars, side-tracks to
stagnant, we can
serve new industries, grade revisions,
never safely predict just what will take
place
enlarged station facilities, etc. This
tomorrow, but the very uncer-
budget is prepared by the heads of de-
tainty of the future requires that we
have
partments concerned and is finally
some deliberate plans.
The best
approved by the executive committee.
answer
to the question as to
The amount of this
whether
budget is, of course,
or not the budget is adaptable
influenced by the outlook for earnings.
to unusual conditions is to draw upon
the experience of widely diversified
3. Checking of Estimates with Perf orm-
business. For this purpose, reference
ances
will be made to significant phases of
In addition to the yearly forecast, the
budget procedure successfully used by
operating vice-president of the railway
the following types of business:
calls what are conveniently known as
Railroad and Public Utility Paper
monthly expense meetings, to which
Construction and Contracting Garment
are invited the general superintendent,
Dairy Products
Newspaper
the superintendent of motor power, the
Ice Cream
engineer of maintenance of way, and
This discussion will be restricted only
the division superintendents.
to budget procedure. The budget aims
An allotment is given each depart-
will be discussed later.
ment for the month, based on: Past

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