Budgeting Essay

Topics: Management, Planning, Future Pages: 2 (601 words) Published: November 12, 2012
Budget is the major financial and economic statement. The role of the budget is to keep track of the money coming in and the money going out. It is essential part of running any business effectively. It can help make a short and long term projections about financial situation, avert a financial crisis and plan for major financial changes. The company has to be able judge its spending performance. Does not matter what type of company it is, the ability to measure performance using budgets is an important process in any business organisation. Planning helps to understand where business is at present and where it is going to be in the future. Company’s planning process has to involve different developing objectives and prepare various budgets to achieve these objectives. There are four main stages in the business planning process, such as clarifying the strategy, marketing, drawing up an operational plan setting, and translating all of this into the financial forecast. It will help to understand if company’s plans will be profitable. Financial forecast is essential management tool, especially profit and loss and cash flow. Company has to be sure that their forecasts are updated regularly. When forecasts are completed, company can start planning. Company can find their own effective way to prepare their budgets. There are two choices of setting a budget. First choice is top down imposition which is prepared by top management, and the second choice is bottom up participation which is prepared by supervisors and middle managers. In management view, participation in decision making often bring advantages to organisations by allowing information to be gathered in any sources. Companies should use spreadsheet or similar software to create their budgets, such as such as Quicken and Microsoft Money. They also can use monthly intervals, which will allow them to view the company’s progress against their targets. Budget should also include results from 12 months...
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