“Many Organizations Operate Budgetary Systems Without Having a Formal Long Term or Corporate Planning System. in Such Circumstances the Budgetary Systems Are a Waste of Time.” Discuss This Statement.

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Budget is the financial blueprint or action plan for a department or organization. It translates strategic plans into measurable expenditure and anticipated returns over a certain period of time. Budgets are prepared for responsibility center (may be department or activity). An individual is assigned to be responsible for that center and is answerable for matters under his control. Budgeting activities include forecasting future business results as sales volume, revenue, capital investments, and expenses, budget also reconciling those forecasts to organizational goals and financial constraints. Besides that, it helps obtaining organizational support for the proposed budget and managing subsequent business activities to achieve budgeted results. Meanwhile, budgets are commonly used in both large and small organization. No matter what size of the organization, typically the benefits of budgeting exceed the costs. The purposes of budgeting comprises compel planning, control, co-ordination, communication, performance evaluation and motivation. For compel planning, management is forced to set up targets to form direction to operations, to anticipate problems and to be ready for changes. It ensures that managers have thought ahead about how they will utilize resources to achieve company policy in their area. For Control purposes, once a budget is formulated a regular reporting system can be establishes so that the extent to which plan are, or are not, being met can be established. It at the same time compares actual results against budgets. Besides that, in the context of communication, the construction of budget can be a powerful support to defining the lines of horizontal or vertical communication within the enterprise. It transmits information about plan to all level of affected management so a desirable objective able to identify and develop. In addition, for performance evaluation, it provides a basis for...
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