Budgeting is important especially for the small or medium size organisation which could not afford to waste any money on any investments that are not worth the price. Furthermore, a structured budget must be able to provide information of where the cash will be spent on and how the organisation gathered the sufficient amount of capital for future investment. It is important to keep track on the organisation’s cash flow as it provides important information on how much money available within the organisation. Insufficient cash flow within the organisation may lead to financial distress or worst, bankruptcy. However, too much cash flow within the company is not good either as the money should be used to invest into profitable projects rather than keeping within the company. Budgeting helps the organisation to prepare sufficient amount of cash flow within the company to help dealing with day-to-day expenses, at the same time, fully utilised the excess capital in profitable…
Budget are mainly prepared the business to control the activities of the business. For example, business owners are able to use master budget which enables business to manage their financial activity in the business. Master budgets combines information about business financial activity like their sales, production cost and income which enables business see their overall performance by looking at their financial activity. For example, they are able to control any financial activity which can affect overall expenses like an increase in cost in supplies but not enough units of sales being sold therefore they have to find a plan to decrease their expenses.…
2. They Budget for many reasons; to control spending, to set goals, to control the direction of the company, and to run effectively.…
A budget is a plan expressed quantitatively in detail. This detailed plan spells out how the company will acquire resources as well as how the resources will be allocated for a specific time. The budget is used for projecting future income and expenses. The purpose of a budget is the assist the company in providing a methodology in determining what direction to go, to improve efficiency, delegate responsibility and provide a means of controlling the finances of the company. In some cases, managers use budgets to determine how to set targets and standards for employees.…
A budget is an instrument used to help managers ensure that the resources used effectively and proficiently toward the goals of an organization. A budget projection can be made on a yearly base depending on previous year or existing one. They can further be broken down quarterly or monthly depending on it use. Generating a budget is complex undertaking, and for a budget to be effective the organization ought to follow it strictly. However, no matter how closely a business follows their guidelines there will always be some form of variances. The organization should expect a few variances and be able to work these discrepancies in any budget constraints.…
A budgeting process based on sound concepts of planning and control can help a company create value. Budgeting serves as a planning and controlling system by documenting the goals and performance objectives in financial terms, then using those plans throughout the year. Monthly performance reports compare budgeted results, with actual results. To control…
Budgets are important because they provide a quantitative measurement to establish goals, coordinate efforts and departments, and help to realize changes are needed before problems occur. Budgets should be broken down into fragments (short term, mid-term, and long term) which will allow for more precise measurement of the success of a project, allow for changes to be made before moving onto new projects, and to expand on goals when appropriate. By setting short term budget goals and reaching them it helps to ensure that the company is on pace to reach its long term objectives. Budgets need to be revised whenever they no longer useful for planning and control purposes. Anytime there are major changes in the processes or operations the budgets will also need to be revised. Budget figures should be measured frequently to ensure they are still reasonable and that the company is still on track to reach its goals.…
The budget enables people in the organisation to control costs, income and cash and to make confident financial decisions.…
A budget is also the benchmark to measure performance, plan for the future and determines staff levels and progression/expansion of the company.…
A budget is a numerical expression of revenues and expenses for a specific period of time. (Sullivan, 2003) It expresses plans of business units in measurable terms. This document is a guide for predicting performance situations. The budget should assist the company in planning use of its resources and providing direction.…
A budget is a tool used by businesses to plan for upcoming revenues and expenses. Businesses understand the difficulty of planning for the future. Circumstances inevitably arise that can change the outlook of a company’s financial picture overnight. Intelligent businesses look to increase flexibility. To do this, businesses explore the relationship between fixed and variable costs, incorporate techniques to transform static budgets, and use flexible budgets to perform cost-volume-profit analysis.…
If costs are not controlled by a company then their profits will be severely affected, therefore budgeting is one method to control cost as ti gives a business an estimate or a target on what their cost and revenue should be. A business has to budget and control the spending in order to know what has been received and spent, otherwise uncontrolled spending could occur and deterioration could happen.…
A budget is how a business manages their money by predicting the amount the company is going to spend. The two types of budgeting our:…
Budgeting is the foundation of running a successful business. A budget is simply a plan for your future income and expenditures that you can use as a guideline for spending and saving. In order to create good budget is by planning and communication. Shim, Siegel, and Shim, (2012) stated that the budgeting process requires good, timely communication. Everyone involved much be communicated the expectations of the budget.…
According to Cleverly & Cameron, (2007, p. 331), when management is done by many different people, budgeting becomes imperative. As a result, the organization needs to have a person in charge of finances who knows how to manage the money. Several strategies have been found to be very efficient in ensuring that this is achieved. The first strategy is to forecast important budgets when a one-year budget is created. The capacity to anticipate as operations grow or worsen allows time to react rather than acting under pressure. This tactic also drives an individual toward the establishment of effective monetary policy (Deschamps, 2004, p. 648). Good management needs policies that limit debt, govern balances, and minimum reserves. The second strategy is budget should be able to recover many expenses. As much as a business usually has some very mandatory needs, whenever something is not so pertinent to the function of the business, this cost should be saved. In health care, the extra expense can be recovered by placing cost on the essential services in the facility. The third strategy is the…