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“Budgeting is a key component in management short and long term planning.” Budgeting is a process of planning, setting goals and defining the objectives of the management that are needed for a period of time. Budgeting also focuses on the essential points in evaluating the alternative actions before coming up with final decisions. Similarly, this is also the financial plan to control the future operations and outcome of the business. Moreover, Long-term plans describe what you expect to accomplish in the next three months, as well as any project that will take longer than a week. Short-term plans cover what you want to accomplish today or this week. Short-term plans also can be steps toward longer-term objectives. The advantage of budgeting is monetary control. When you establish a budget you gain more control over your finances compared to going without. Without a budget you don't have a full idea of how much money you have coming in and going out, so you don't know if you will have a budget surplus or deficit at the end of each month. Knowing your exact budget figure at all times is empowering and allows you to make informed decisions. Another advantage of a budget is that it allows you to set both personal and financial goals more efficiently. Once you have an accurate picture of your financial situation you can start to make realistic plans with your money. For instance, you can start contributing your extra money toward a savings account. You might also decide, after reviewing your budget, that you should start seeking higher paid work. Having a clear plan helps motivate you to take positive actions. Furthermore, Budgeting forces managers to do better forecasting. Managers should be constantly scanning the business environment to spot changes that will impact the business. Vague generalizations about what the future may hold for the business are not good enough for assembling a budget. Managers must put their predictions into...
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