The definition of budgeting in management planning
A budget is defined as management’s quantitative expression of plans for a forthcoming period. There are many various levels budgets are prepared of an organization. The master budget includes operating and overall financial pan for the period which reflects and projects goals and objectives. Operating budgets can tell the company’s planned sales and operating expenses. Financial budgets reflect the financing plans such as loan, leasing and cash management. The role that effective budgeting plays in the management of a business is best understood when it is related to the fundamentals of management.
Agree that budgeting is the key component in management short and long term planning Yes, I agreed. Budgeting is a key component in management short and long term planning.
Advantages of Budgeting
Most companies practice budgeting to prevent overspending of expenses and financial control, even Government bodies practice Budgeting planning for short and long term. Budgeting is about planning to spend less than what you are bringing in. Without budgeting, it is difficult for a company to plan or gage on how much money to set aside for expenditure, expenses of departmental activities, loss of monetary control and other shortfalls. Budgeting is an important component of finance success and managing a company. It is not difficult to implement. Many people have the misperception of budgeting and they thought that it is something to do when they are short of cash. The true is budgeting isn’t for time when your money is tight or when company facing financial difficulties. In fact, an effective budgeting system can help managers perform their major management functions that help to make short- and long-term projection. Benefits in short-term
* Provide basis for responsibility accounting to individual managers to identify their budget center and for achieving the stated budget...