Budgeting, Financial Management

Budgeting:

All business owners should recognise and understand the importance of preparing and maintaining a financial budget for their business.

Budgets are an essential financial planning tool, a method of control over the day to day operation of the organisation, and an opportunity to involve people at all levels in the budget planning and implementation process.

In many cases of business failure the major contributing factor was the inability of the organisation to either comply with a predetermined budget, or a failure to prepare a budget at all.

Budgets have a number of purposes, including:

  • Assist organisations control financial and overall business results organisation
  • Assist in decision making
  • Aid in coordinating various functions and activities that make up any organisation
  • To assign responsibility to managers or staff for achieving levels of performance, and to authorise amounts that those staff can spend
  • Motivate managers / staff to obtain commitment to achieving budgeted goals
  • Increase the credibility of the organisation in the eyes of third parties

Budgeting and budgetary control can be regarded as a combination of forecasting, planning, and monitoring financial results against plans.

By forecasting aspects of revenue and expenditures (using available information), and then following up with regular comparisons of actual results against budget, managers can determine what action if any should be adopted in order to:

  • Identify and address areas of poor performance
  • Improve areas which are performing well
  • Foresee any need for additional financing
  • Anticipate and plan for growth and/or changes in business circumstances
Posted Date: 10/1/2012 4:14:28 AM | Location : United States







Related Discussions:- Budgeting, Assignment Help, Ask Question on Budgeting, Get Answer, Expert's Help, Budgeting Discussions

Write discussion on Budgeting
Your posts are moderated
Related Questions
BLACKWATER PLC (a) Calculation of NPV EV = (0.3 × 0.50) + (0.5 × 1.40) + (0.2 × 2.0)    = 0.15 + 0.70 + 0.40 = 1.25 (i.e.) $ 1.25m To conclude the NPV of the project

Concepts of Cost of Capital 1. Explicit Cost And Implicit Cost The explicit cost of any source of finance may be described as the discount rate that equates the current v

Explain what a bond is and discuss its nature as a "fi xed income" security.Discuss important terms in relation to bonds as the "price", "maturity", "current yield", "yield to matu

a) Gross profit = $500,000 and Expenses = $100,000 for Year 2. b) Year 2 GPM = $500k / $1,000k = 50.0% Year 1 GPM = $400k / $850k = 47.05% Year 2 NPM = $400k / $1,000k =

Why do you think closed-end country funds frequently trade at a premium or discount? Answer:  CECFs (closed-end country funds) trade at a premium or discount since capital market

The holder of a corporate debt instrument is preferred to equity shareholders in the bankruptcy proceedings. However, secured/senior creditors are preferred to no

The Walter's model, thus relates the question of distributing the dividends and retaining the earnings to the investment opportunities that are available with the firm. (i) If a

The so-called "cash flow" (net income plus depreciation) is a flow of cash, but is it a flow to the shareholders or to the company? Suppose that net income plus depreciation is

What are some of the factors which common stockholders consider while deciding how much, if any, cash dividends they desire from the corporation in which they have invested? Comm

TYPES OF FINANCE FUNCTIONS/ DECISIONS The most main decisions in finance relate to procuring funds, investing them in profitable projects or assets, operate for the year and a