Well-managed organizations make budgeting an integral part of the formulation and execution of their strategy. In Chapter I. we defined a budget as a quantitative expression of a plan of action. Sometimes plans are informal, perhaps even unwritten, and informal plans sometimes work
In a business, making decisions, which affect the profitability of the company, are occurred every day. To make effective decisions and coordinate the decisions and actions of the various departments, a business needs to have a plan for its operations. Planning the financial operations of a business is called budgeting. (Purpose of budget, no date) A budget is ‘A quantitative statement, for a defined period of time, which may include planned revenues, expenses, assets, liabilities, and cash flows’  A budget has five main purposes: Communication In the budgeting process, managers in every department justify the resources to achieve their goals. They explain to their superiors the scope and volume of their activities as well as how their tasks
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
Uses of Budgeting Control 2.1 Planning A budget requires the management to plan for the future. This in turn forces the managers to consider departmental operations and individual managerial objectives and produce a course of action in which meagre resources are allocated efficiently to attain desired objectives. 2.2 Communication The budgeting process is an important avenue through which the company’s objectives and the problems likely to be faced when trying to achieve them are conveyed between top and middle management. Once it has been approved, the relevant managers will tell all the staff involved. This ensures that the efforts contributed by the departments are all in the same wavelength.
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).
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.
A budget may be a set of interlinked plans that quantitatively describe AN entity\'s projected future operations. A budget is employed as a yardstick against that to live actual in operation results, for the allocation of funding, and as an idea for future operations. The budgeting method usually begins with a method designing session by senior management. The management team then applies the united strategic direction to a series of plans that roll up into a master budget. The plans embody a sales budget, production budget, direct materials budget, direct labor budget, producing overhead budget, sales and body budget, and stuck assets budget.
Advantages of Budgetary Control and Budget There are always two sides to a coin and despite having some disadvantages, there are also advantages to having a budgetary system in an organisation. There are countless advantages to a budget system and the budgetary control in an organisation. To begin with, having a structured budget allocated to individual departments can compel the management to think further about the future, which is probably one of the more important feature of a budgetary plan. It ensures that the management would look ahead to set out detailed plans in order to achieve targets to anticipate and give the organisation a purpose and direction. The greatest advantage of budgetary control is that it makes a clear view of businesses to ensure that the plans laid for the future are achievable and it gives managers a distinct direction when carrying out day to day activities with their team to ensure that every business day in that financial year would be beneficial and driven towards the goals
It also follows the same concept of analyzing and preparing the sales budget first because there CEO feels that it is the basis for doing any other things. He stated that all the other budgets are related to the sales budget. When we prepare a project report for obtaining Finance from the bank, the bankers analyzed the projected sales because it will determine the profitability. This company also follows the concept of preparing the sales budget and based on that other budgets are
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