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“Management of any business will be ineffective without the preparation and use of budgets.”
All types of budgets are good planning tools and can also serve a very valuable control function. It is necessary to plan and to manage it's financial performance once the business starts to operate.
The term budget is probably well understood by layman. For example, people ‘budget’ for their own household expenses even if it is only making a rough comparison between this month’s salary and this month’s expenditure. Such budget might not be very detailed but it still contains all the important features of what we mean by a budget. Budget is also useful in a business because they can encourage us to examine what we have done in relation to what they could do. And for a business, owner should regularly review the company budget to ensure that it is effective and is also important if the business is growing and planning to move into new areas as it will help to predict future cost with better reliability. It is also known as budgeting control when it is used for controlling purposes which involves in making a comparison between the actual and budgeted results and then taking any necessary corrective actions.
Since a budget is a measurement tool, accountability and review are necessary for control. Without review, there can be little corrective action and a loss of control. A lack of complete participation by all levels of management within the firm as in budgets dictated from upper management without input from the accountable, people may have negative thinking’s of the lower managements. Poor estimates, poor feedback and lack of timely, corrective action are also ineffective to the management concerning budget maintenance as these are several weaknesses of uncorrected large variances between performance and budget objectives. Without any working knowledge of the operations in the business, it is difficult to maintain a working knowledge of this current operational
All types of budgets are good planning tools and can also serve a very valuable control function. It is necessary to plan and to manage it's financial performance once the business starts to operate.
The term budget is probably well understood by layman. For example, people ‘budget’ for their own household expenses even if it is only making a rough comparison between this month’s salary and this month’s expenditure. Such budget might not be very detailed but it still contains all the important features of what we mean by a budget. Budget is also useful in a business because they can encourage us to examine what we have done in relation to what they could do. And for a business, owner should regularly review the company budget to ensure that it is effective and is also important if the business is growing and planning to move into new areas as it will help to predict future cost with better reliability. It is also known as budgeting control when it is used for controlling purposes which involves in making a comparison between the actual and budgeted results and then taking any necessary corrective actions.
Since a budget is a measurement tool, accountability and review are necessary for control. Without review, there can be little corrective action and a loss of control. A lack of complete participation by all levels of management within the firm as in budgets dictated from upper management without input from the accountable, people may have negative thinking’s of the lower managements. Poor estimates, poor feedback and lack of timely, corrective action are also ineffective to the management concerning budget maintenance as these are several weaknesses of uncorrected large variances between performance and budget objectives. Without any working knowledge of the operations in the business, it is difficult to maintain a working knowledge of this current operational