What is an Administrative Budget?

Charles Burke

An Administrative Budget is the spending plan for all aspects of a business not related to the
production of the business’ products or services. For a business producing a physical product, it is
fairly simple to determine the expenses that fall within the administrative budget. For a service
business, it may be more difficult to differentiate between production and administrative expenses. In
order to accurately account for the finances of any business, it is vital that all expenses be properly
classified as either production-related or administrative, and that the expenses be tracked as such.

Examples of the expenses that fall under the Administrative Budget for a business include:
 Facility purchase or rental
 Equipment purchase, rental and maintenance
 Utilities
 Insurance
 Marketing and advertising
 Shipping and transportation

Administrative expenses may be referred to under other names. A common one that I have dealt with is
“overhead expenses.” This carries a negative connotation, as it was always assumed, and often
emphasized, that the business wanted to operate with a minimum of overhead. In more than one case, I
have seen managers put a hard limit on the percentage of administrative time employees could report
on their time sheets. This lead to problems as employees would fail to perform necessary
administrative tasks for the business, and necessary work was left undone. This would be followed by
a period of time in which administrative expenses increased while employees tried to catch up on the
administrative end of the business.

A common assumption is that the administrative budget for a business must always be much smaller
than the production budget. This is not true for all businesses. Some businesses, due to the nature of
their product or service, maintain a higher administrative budget.

The question I have often heard asked is, if it is not part of the production cost, where does the money
for the administrative budget come from? Contrary to what some people seem to think, the funds for
the administrative portion of a business does not come from some mysterious source. Just like any
other cost for a business, the administrative budget must be included when setting the selling price of
your products and services. Production costs per item or per service task/hour are relatively easy to
determine. Administrative costs must be calculated as a total for the budgetary period, then applied to
all projected sales for the period in order to determine how much to include in the product/service price
to cover administrative expenses. This is why profit projections can be undependable, because the
administrative expense portion of total sales are harder to forecast for any given period of time.

Like the production budget, the administrative budget for a business should be determined on a regular
basis, whether it be annually, quarterly, monthly, or any other time period that is appropriate for a
business. Administrative expenses can be volatile at times, and it not generally good practice to simply
carry a budge forward from one time period to the next without evaluating the previous period’s actual
expenses against budget, and without looking forward for anticipated changes in the necessity of
expenses and /or changes in the amount of those expenses. Historically, a common mistake made in
many businesses is the “carry it forward” method of budgeting for administrative expenses. This
assumes that the administrative expenses remain constant, either as a fixed amount or as a percentage
of company revenue. However, administrative expenses may be subject to changing factors that differ
from factors affecting production expenses, and failure to account for such changes can create problems
for the administrative side of the business. And a failure to examine actual administrative expenses
against their budget can result in a failure to recognize critical changes in expense patterns that may
have a long-term effect on the overall business.

What is an Administrative Fellowship?

An Administrative Fellowship is a specialized post-graduate training program for transitioning between
the academic environment into the actual management of a healthcare organization. The
Administrative Fellowship provides a fast track for management and administration graduates into
operations management positions in the healthcare field. The fellow benefits from specific mentoring
and exposure to the day-to-day workings of the organization, as well as learning a lot of the soft skills
that are not typically covered in the academic environment. The organization receives the benefit of
motivated job candidates with the most current education being offered, and who will complete their
fellowship ready to move into a productive position in the organization. For both the Fellow and the
organization, the Fellowship offers a sort of “try before you buy” opportunity for both parties to decide
whether the Fellow is truly a good fit for the organization and vice versa.

The difference between an Administrative Fellowship and an internship that internships are usually (not
necessarily) for those who are still working on their degree. An Administrative Fellow has usually
completed their degree program, and can be assumed to be ready to take a more active part in the
organization even as they are continuing to learn more about how the business operated. I have
personally experiences a number of internships where the intern found themselves unhappy with the
work they were expected to perform, and in some cases, opted for a change in their career path based
on their internship experience. Most of those taking part in and Administrative Fellowship are firmly
settled on their career path.

Choosing the Best Administrative Assistant Education

Someone seeking to enter into an Administrative Assistant position should pursue a degree or
certification as an Administrative Assistant, or in Office Administration or Business Administration.
Business schools and vocational schools also offer programs for Administrative Assistants, but these
schools typically lack the accreditation of a college, so the certification from these schools will not
carry as much weight with prospective employers. When available, internship programs are a valuable
resource both for gaining necessary experience and building business relationships that can lead to
future employment.

Requirements vary from business to business, with some requiring a degree, some expecting
certification in one or more fields, and some requiring only a high school diploma or equivalent GED.
At higher levels of business, the requirements become higher as well, particularly placing more
emphasis on previous job experience instead of education.

A person opting to move into an Administrative Assistant role later in their career may draw upon their
previous experience for this job. If they are making a major career shift, from an unrelated field of
work, it may serve them well to pursue a degree as well. They may also choose to make use of
continuing education programs from colleges and other institutions to gain the necessary skills, and
pursue mentoring programs that are available with many larger companies.

What is an Administrative Services Manager?

The Administrative Services Manager is responsible for directing and overseeing all of the
administrative or non-production aspects of a business.

Areas of responsibility include:

 Supervise the administrative personnel
 Plan, direct and evaluate the operation of all portions of the business not directly related to the
production of physical product or delivery of services
 Oversee the departmental operations throughout the business to ensure that workflow proceeds
with minimum obstruction and that the needs of the business continue to be met
 Co-ordination of efforts between departments within the organization
 Oversee budgeting and finances for the business
 Oversee planning and maintenance of facilities and equipment for the business
 Oversee regulatory compliance and compliance with health, safety and environmental standards

As an Administrative Services Manager, many of these responsibilities may be delegated to others, but
responsibility resides with the manager. Awareness of what is happening in the layers of the
organization under your responsibility is a major part of any management position, and this one is no
exception.