Strengths And Weaknesses Of A Budget

Introduction

Organization can achieve its strategic and financial goals by focusing the planning process on the organization’s strengths and weaknesses. A critical part of this strategy includes the budgeting process. Many people associate the word budget primarily with limitations on spending. For example, management regularly gives each unit in an organization a spending budget and then expects them to spend within the limits prescribed by the budget. However, budgeting can play a much more important role than simply limiting spending. Budget is a familiar and very important type of short range plan that is expressed in a numerical terms how the resources of a company can be distributed to attain a desired profit. A budgeting system is one of the oldest instruments of a management control system. Since prepare a budget force a company to determine how much money will be coming in and cost will be incurred, it serves a dual purpose to become a controlling as well as a planning operation. There are many examples of seemingly healthy businesses that failed because managers did not prepare budgets that would have identified problems in future or they failed to monitor and adjust budgets to changing conditions. A great deal of careful thought must go into its planning because budget is a guideline to what will take place over a lengthy period of time. Well-managed organizations make budgeting an integral part of the formulation and execution of their strategy. Both large and