Activity-Based Budgeting

This process is used to create a budget based on planned activities. This includes the required resources and related costs for each activity.

The activities are a part of an activity plan. An activity plan is the basis for a resource plan that shows the resources required to carry out the activities. Resource plans also show available resources, so these can be compared to the required resources.

Before you start

Outcome

The resource plan is transferred to a central budget after using this process. During the transfer, the number of activities multiplied by the number of available or required resources is recorded and made into budget transactions.

Follow these steps

  1. Enter activities in activity plan

  2. Transfer activity plan to resource plan

  3. Adjust resource plan

  4. Transfer resource plan to budget

Enter Activities in Activity Plan

For each budget officer, budget number, version and period, you enter activities in ‘Budget. Connect Budget Activity’ (BUS160). The entered information makes up the activity plan, which can be printed for review. The plan can also be changed when necessary.

Transfer Activity Plan to Resource Plan

The activities in the plan are then multiplied by the number of resources required to carry them out. This is done in ‘Budget. Connect Budget Activity’ (BUS160). This results in a resource plan.

Adjust Resource Plan

The resource plan contains the resources required according to the activity plan as well as the available resources entered for each budget officer. Therefore, this shows whether the budget officer has too many or too few resources to carry out the activities. Resources can then be added or deleted as necessary in ‘Budget. Connect Budget Resource’ (BUS170).

Transfer Resource Plan to Budget

After adjusting the resource plan you can use it to create budget transactions. This is done in (BUS170). The number of each resource in the plan is multiplied by the costs connected to the resource and a budget transaction is created. Note that the greater value of the number of resources or available resources is used in the calculation.

Description

The example below describes activity-based budgeting, which includes creating an activity plan, resource plan and budget.

Assume a budget officer must carry out 2,000 customer visits. Each visit takes 8 hours of a sales resource and 2 hours of a sales assistant resource. In this case, the activity plan will contain 2,000 customer visits.

The resource plan will contain 16,000 hours of sales resources and 4,000 hours of sales assistant resources. The following average yearly and hourly costs are related to a salesperson, based on 1,760 hours worked annually.

Annual Cost Hourly Cost
Salary 500,000 284.09
Social Security 160,000 90.91
Travel 50,000 28.41
Other 25,000 14.20

The sales assistant has the following costs:

Annual Cost Hourly Cost
Salary 300,000 170.45
Social Security 96,000 54.55

The budget for this example has the following cost components:

Salary 16,000 x 284.09 + 4,000 x 170.45=5,227,240
Social Security 16,000 x 90.91 + 4,000 x 54.55=1,672,760
Travel 16,000 x 28.41=454,560
Other 16,000 x 14.20=227,200
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