Budgeting can be defined as a solid process to decide the estimate of revenue and expenditure for the specific time period. This definition of budget serves for all, country, city, state, business or personal matter. It is observed that, each successful company never moves forwards without deploying budget process (Al-Shawabikah, 2000). So, talking about Personnel Budgeting, it is one of the crucial aspects of any business to keep labor or personnel budgeting in the mind at the start and end of the year to maintain or increase productivity and profitability of the business. In fact, it is similar to an operational plan, represented in the financial terms considering income and expenditure’s estimation (Dees & Paul, 2004).
It is also a document to serve as control for monitoring and review. The budget system should be such that it makes it imperative for management to establish goals and objectives, define policies, develop programmers’ both long term and short term, measure performance against the targets and in the process, revises the part of management. In a way of budgetary control system has been increasing an enterprise’s profits, and a goals-achieving machine for facilitating organizational coordination and planning while achieving the budgeted
Budgeting in this business helps as it can show how much money is coming in and out of the organisation, such as the CEO would be aware of how much they would need to spend on each department and how much would return as they would not wish to overspend and lose the money. Also using budgeting, it helps B.A identify inefficient expenditures and they can adapt quickly leading them to achieve their financial goals. This business uses budgets so it can set financial targets, to motivate employees and to assign responsibilities, to improve proficiency, to provide and turn strategic direction and objectives into practical reality, to monitor business performance and to control income and expenditure so the business does not overspend and to ensure there is enough capital set aside for emergencies. To conclude, this business uses budgeting in order to create an action plan for their business which can identify current available capital and estimates costs and anticipates
The study of Drury (2004)shows that the conventional annual budgeting process is a defined and approved plan to determine the actions and activities to be carried out within a certain period of time by using a certain amount of resources to achieve the objectives given. This process deals with the projection of activities, contingencies, strategies and process interactions within the organization. The budget also controls the planning process to ensure that the organization does not deviate from financial and operating goals. These activities and processes require a thorough analysis of the organizational processes; plans for targets to be achieved by each department and by the whole organization; and expected results can be achieved and beyond. Therefore, one observe that the annual budgeting process is a complicated and boring process that requires the highest management direction and lower managerial participation.
Another function of the budgetary control system is to enable management to examine the potential successes or failures of the company as it allows for actual performance to be measured against targeted performance. Lastly, the budget control system is put in place to enhance coordination between different departments in the organization as different departments are assigned to implement various policies and functions in the budget. Its function is also to ensure there is somebody to take responsibility when budget expectations are not
Make sure that the monthly budget is documented on a spreadsheet covering the whole project from the initial stage to completion stage. • Establish cost controls – arrange clear cost controls and consider the responsibilities for the different types of the project expenses. Assign the people that will be signing off and approving the timesheets, materials, hardware, software and vendor invoices. This is a very important stage as it will show where your actual costs will be booked for the
It makes proper coordination and communication across the organization. Budgetary control leads to achieve economies of sale, efficiency and effectiveness which increases the profitability by waste reduction. Since budgetary controls continuously monitor the operations of organization, it can take immediate actions for correct the variances or take prompt action to set new standards. Budgetary controls helps to plan, communicate and delegate the activities of an organization and allocate the resources which required to achieve the desired result. It also monitor and measure the performance of an organization to identify the variations and takes corrective actions for achieve the
According to Edafalje (2011), budget represents the accounting instrument used by an organization to plan and control the operation of the organization. The budgeting process may be carried out by companies to estimate whether the company can proceed with its projected income and expenses. Holding a formal and structured budgeting process is the basis for good business management, growth and development of an organisation. Planning should be the major component of the business budgeting process to ensure the organisation achieve both short and long term goals. Research shown that good planning will typically reduce the cost of a project by about a factor of ten (10).
In order to create a budget you must have a forecast, there is no way you can forecast after the budget is done. The production volume is important for the next step because you will need to know how much a business is making in order to create a budget. Estimating manufacturing cost and operating expenses is important because it enables the business to know how to create the right budget. The cash flow and the financial effects is important for the next step because it allows the business to know all the flow of cash from all of the steps that were done prior. Formulating the projected statements is meant to be the last step because you need all of the prior steps in order to create an appropriate