Outcome Based Budgeting

Outcome based budgeting is gathering traction, particularly in government sectors and service industries.

Traditional budgets measure inputs, agreeing how much resource will be allocated to each cost centre. Yet people are more interested in the outputs achieved.

There is broad recognition that the amount of financial resources used has little bearing on the benefits those resources deliver. In government organisations, outcome measurement has steadily gained traction as a more accurate way of extracting the most value from precious funding.

 This means linking budgeting to target setting.  It can be achieved in a number of ways:

  1. Firstly, through a simple mechanism of linking budgets to strategic objectives and ensuring annual targets are linked to levels of investment and expenditures.
  2. Secondly, through priority based budgeting, where the alternative levels of expenditure are linked to different target that may vary by quality or quantity.
  3. Thirdly, through activity based budgeting, where the activities for which resources are assigned are related to the predetermined drivers which are usually output measures.

We can advise on the alternative methods of linking resource plans to targets and can help to manage the implementation. Contact us for more details.

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