Specify whether the cost is one-off or recurring. A cost justification template allows the decision maker to consider all relevant elements before making a decision, and provides a structured framework to the process, improving the quality of the decision making process significantly. Select the entire spreadsheet, copy it and paste it into your word processing document.
She has written for Entrepreneur, Atlantic Publishing and other clients. Her extensive experience writing a budget justification sheet work in small business, entrepreneurship, marketing communications, adult education and training.
Generally, approval becomes easier when more people benefit. Sometimes, the inverse may also be true, and the investment may lead to reduction or elimination of some existing cost.
Include a brief background of the usage and a description of the future need for each item. The most important part of a cost justification is the perceived benefits resultant from incurring the cost. The finance department may make the recommendation based on availability of finance rather than any technical consideration.
For instance, new replacement machinery may come with free service during the guarantee period, doing away with the annual maintenance costs incurred on the now obsolete machine. Tips When calculating costs, add an extra 5 percent to 10 percent, and use that figure in your proposal.
For instance, the supervisor may return the form to the employee for any changes. Warning Double-check all figures and write-ups to ensure they are accurate and speak to the reader, whether that is the budget director, a supervisor or the company president. Wherever appropriate, determine the present value of the expected results, or the future value of the investment, to allow decision makers incorporate the time value of money when making the decision.
Create a document that will become your finished proposal.
Business owners or managers may require the person incurring the cost to explain the reasons for doing so, and expect proof that expected returns would exceed the cost.
All expenditure of substantial nature, not included in the annual budget require such cost justification. Items you will need Spreadsheet program Word processing program Open a spreadsheet program on your computer. Such indirect benefits may not relate directly to the benefits, and may be difficult to quantify.
Upon rejecting the proposal, the supervisor may simply forward the same to the business owner after noting down his objections, allowing the business owner to have the final say.
For instance, purchasing a new Energy-Star rated monitor may be part of a larger green initiative for which a separate budgetary allocation may exist.
For instance, installing an automatic attendance tracking system may automate the process and provide direct benefits such as better control over timekeeping and reduced work for the HR team, and also indirect benefits as employees coming in a bit early and leaving a bit late to avoid being caught by the automatic time-stamp.
Similarly, clarify whether the cost is one-off or part of some other big expenditure. When the cost incurred is to resolve problems or take advantage of some opportunities, there would invariably be many approaches. For instance, incurring the costs of ergonomic chairs may benefit the company indirectly by increasing productivity, but the primary beneficiary is the worker.
One way to do so include performing a lifecycle cost analysis. It is easier to negotiate down than to have to request more. The cost justification needs to substantiate why the cost is necessary, and not avoidable.
Across the bottom row of the spreadsheet, calculate the total expenses for each month. Nature of the costs: Clarify whether the cost leads to any other follow up costs.
You will also need to write a brief description of each item and a justification for your budget request to give the reader more information on which to base his or her decision. The following steps will help you prepare a successful budget proposal.
Format the numbers in the spreadsheet so that the totals are in bold print. Cite this Article A tool to create a citation to reference this article Cite this Article.the budget and budget narrative.
You may submit the budget and budget narrative using this form or in the format of your choice (plain sheets, your own form, or a variation of this form). However, all required information (including the budget narrative) must be provided. Any category of expense not applicable to your budget may be deleted.
Writing a Budget Justification Most sponsors require you to submit a budget justification (sometimes also called a budget narrative) in addition to an itemized budget.
This allows you to explain the need for each line item in the budget, as well as show the breakdown of calculations used to arrive at the amount in each line of the budget.
Sample Budget and Justification (match required) THIS IS AN ILLUSTRATION OF A SAMPLE DETAILED BUDGET AND NARRATIVE. WITH GUIDANCE FOR COMPLETING SF A: SECTION B FOR THE BUDGET PERIOD.
Cost justification is a substantiation of the need for an item of expenditure, with documentary or any other evidence.
Business owners or managers may require the person incurring the cost to explain the reasons for doing so, and expect proof that expected returns would exceed the cost. If this is a budget for staff or internal resources, feel free to modify the language in this template accordingly.
PERIOD OF PERFORMANCE. The budget set forth in this Budget Proposal covers the period of performance for the project or [NUMBER] months of effort. calculating the F&A costs base, writing the justification, managing funds, and for audit purposes. A modular budget justification should include: Personnel Justification: The Personnel Justification should include the name, role, and number of person-months devoted to the project for every person on the project.Download