I disagree that budgeting is an unnecessary burden on many managers to a large extent. This is because budgeting provides an opportunity to reevaluate existing activities and evaluate new ones. Compel managers to think ahead and estimates of unit and sales during operating period as well as selling expenses, so as to estimate the profit target. Once the budget is set, region, product groups and/or account types can break it down. Also, budgeting talks about the optimum profitability in a given period; since firms typically look for profit maximization in the long term; while it seeks sales maximization in the current period.
By providing and opportunity to reevaluate existing activities and evaluate new ones, managers are able to get a further understanding of the sales, production, distribution and finance on their current activities. Hence with the above that they have found out they are able to enhance and create new ones.
In additional, budgeting compel managers to think ahead as they have to consider factors when forecasting sales. This factors include: past patterns of sales, market research studies, advertising and sales promotion plans, competitors’ actions and general economics conditions. While considering these factors, managers will have to do a research studies on the past and present and make a comparison on these and estimate sales in the future.
In order for a company to have a good budgeting or performance, manager will need to foresee what will happen in the future and engages it’s staffs on the budget processing, creating and environment where there is a true two-way flow of information. Example from the top down, the top management gives sales and profit targets to various organization units and unit heads make plans to achieve the objectives. From the bottom up, Unit heads and their subordinates team up in the setting of the sales and profit objectives and also plan to meet them. As from the example above, top management is away...
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