The Australian National Audit Office has identified the advantages of activity based budgeting: The Advantages - Output costs are supported by a schedule of costed activities - Opportunities to examine work processes - Identifies non value-adding activities that can be eliminated - Basis of a performance measurement system and direct link between strategic goals and operational realities - Enables cost profiles to be managed - Accurate costing data for operational management - Costs are transparent, understandable and actionable Disadvantages - Activity definition may become too detailed and the model may become too complex and difficult to maintain - Underestimation of the task of collecting activity driver data - Implementation may be considered a financial management fad and there is insufficient commitment from operational managers Activity Based Budgeting Disadvantages - Usually requires buying Activity Based Budgeting software - Requires training of all managers including budgeting department - Requires people to really understand what drives their budget - Eliminates excuse that activity volume changed because it makes visible volume changes - Requires everyone to collect or estimate activity volume By understanding how resources are transformed into products or services, and byfocusing on the cost of activities, activity based budgeting helps an organisation to obtain a greaterunderstanding of how costs behave in their organization and which activities create significant amounts of cost. And stop thinking about it as a financial diet. A budget is simply a tool to increase your consciousness of how and where you spend your money. It is also guideline to help you spend your money on the things that are most important to you. A budget is to successful money management as a rudder is to a ship. Budgeting and forecasting scenarios can be integrated into your financial reports and extend their use for future cash flow projection, variance reporting, and return on investment. If an organization's sales volume is projected to increase significantly over a period of time, first and foremost it must be able to make a good budgeting and forecasting. Whatever that is, we can achieve this through budgeting and planning. What to budget on and to plan on: 1. Spending Make a spending plan - Now's the time to change your free-spending ways. To do that, track the money that's coming in and going out. Fortunately, there are easy ways to do that. Go online and search for "free budgeting software. So instead of putting it off, begin by making a small, automated contribution to your savings account just after each paycheck. Even as little as $10 a paycheck can add up fast in a short period of time. Then, slowly begine to increase the amount each month. And if it is your child's education you're saving for, you'll need to be a little wiser and start a little bigger than that now: Alwayas assume that you will need to save between $115 and $284 a month. If you are really determined to save, you can stay alive by eating on a strict diet. A diet not necessarily for you, but for your wallet. Personal budgeting would make crackers and a glass of milk do for a meal, depending on your level of determination. You budget enough money for your house, may it be a condominium unit or an apartment.