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Subject: Information Technology Budgeting

Tutorial: What Every Manager Needs To Know About Budgeting


Five Common Misconceptions

No. 4:  Budgeting Is Just Accounting By Another Name

One thing budgeting and accounting have in common is that both are expressions of an organization’s activities in financial terms. Here is where the similarity ends:

  Characteristic Accounting Budgeting
  Purpose External reporting Internal management
  Perspective Retrospective Prospective
  Reporting Detail General Specific
  History Long Relatively recent
  Applications availability Many Few (many emerging)

Both accounting and budgeting provide important information about an organization; but, they do not provide the same information and do not serve the same purposes. When properly conducted, budgeting can help to:

  • align IT projects and activities with organization strategy and business objectives
  • show the cost drivers for IT expenses
  • make better IT investment decisions
  • assess performance
  • provide early warning of operational problems
  • provide assurance to senior management that its decisions are being implemented as intended

These are benefits that accounting information is not designed to provide.

What Every Manager Needs To Know About Budgeting, Lesson 5 of 14

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