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
Describe the major factors contributing to effective cash management in a firm.  Why is the cash management process more difficult in a MNC? An effective cash management system s

What are some of the primary advantages when a corporation has operations in countries other than its home country?  What are some of the risks? Foreign operations may decrease

Bonds are usually recognized by yields, which change from time to time owing to many market forces. There exists an inverse relationship between the bond price and the

In the Index Amortizing note, the principal is repaid according to an amortization schedule linked to a specific reference rate. It is structured in such a manner

I just purchased a stock that would pay the dividends of the first four years as D1 = $0.65, D2 = $0.74, D3 = $0.79, D4 = $0.84. I also told that the dividends would grow continual

Abnormal Earnings Valuation Model Abnormal Earnings Valuation Model is a method to analyse the value of the firm. The value of the firm can be the sum of three components - the

Karl Robinson is about to make his first major decision as president and chief executive officer of Conway Control & Instrument Corporation, a manufacturer of electronic test instr

Define the conversion and competitive effects of exchange rate changes on the company's operating cash flow. Answer:  The competitive effect: Exchange rate modifications may in

How does a preemptive right protect the interests of existing stockholders? A preemptive right defends the interests of existing stockholders by providing them the opportunity to

define ratio analysis. explain the advantages of ratio analysis