Accounting and Finance for Managers - Essay Example

Accounting and Finance for Managers Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Course Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Lecture Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Date Budgeting in a global perspective is defined as a planned allocation of available funds to various sectors and departments. It is through budgeting that different economies control overspending in less productive area and lay more emphasis on more productive and essential areas. Budgeting is practiced by individuals who control their incomes by planning for all their expenditures and savings (Banks, 2008 pp 7). Businesses organizations also practice this aspect of budgeting since it determines the profits made after success of planned budgets. To a national level, all economies of planet earth practice budgeting which is usually read to the public by finance ministers at the end of every financial year (Writers of Wise Bread, 2009. pp 301). In a world characterized with globalization, budgeting has more than one role. This is because budgeting is used to give some intended outcomes depending on the budgeter. In other cases, it is used to plan and so on. The following are some of the budgeting roles; one of the many roles of budgeting is to determine direction (Grieves, 2005 pp. 123). Budgeting is used to give an organization the direction of the future in terms of fund allocation, capital improvement, overhead needs, technology needs and borrowing funds. Let as now discuss each of the four in details to give more light on this point. In the fund allocation, the organization will be able to know how much money they allocated to a certain department and according to the department’s needs it will be allocated this amount, in the future this piece of information will be useful since it will assist in determining the amount to be dispatched next time. In capital improvements, it is the organization either government or nongovernmental direction in that it will answer the question of (what are the expansion needs of the organization?). It will also provide an answer to the question of (are the lease holds improvements meeting the required threshold?). If by any error of commission or omission these questions are not answered, then the organization may find its expenses surpassing the funding set aside for these projects. In the overhead needs the budget will gauge the inflation of the organization since the utility cost is not a constant factor. It is therefore very important for an organization to determine if certain costs are unnecessary (Ronen & Livnat, 1991 pp. 320). In the case of a nongovernmental organization it is important to monitor closely the overhead costs in order not to deprive the donor pocket. In light of need of technology, the budget requires the organization to realize that computers are very essential to the running of the company and that they need to be renewed every year. These cuts across the bound, since in the case of any technological changes, it is the role of budget to fund this new development. The borrowing of funds in an organization depends on the capital at hand. If the expenses surpass the requirement then the organization has no other option but to find another source of fund in order to cater for the requirements. For example, in a nongovernmental organization who never considers borrowing as an option to cater for their expenses, in case there is delay of funds from the donors, they then run to borrowing for the organization to run smoothly. Another role of budgeting is to forecast out comes. Say, if an organization spend most of their funding in a certain department, then the department has to reciprocate and give an equal (if not more) returns. It will also provide feedback on whether the organization should spend more on saving than in investments. This serves as an indicator on whether the organization is spending too much or too little (Seitz & Ellison, 2004 pp. 56). Budgeting will again help in setting targets in numerical terms. If a certain organization is receiving this much in the beginning of the financial year then the management should see to it that the all the stakeholders have played their part and that the money collected at the end of the year is more than the allocated amounts. If for instance, the organization does not receive more amounts then it requires proper budgeting schemes in order to start the next financial year on a positive note. If used properly, budgeting can help the manager to better their services. In most cases, a board associates the failure of budgets with the managers. To avoid this, managers try to use budget to test whether the indicators of the business have yielded the required results and know whether they are effective or not. It can also be used to compare the proceeding of the company on monitory terms. This helps the manager to improve their services to have better outcomes. Budgeting may also help to measure the long term objective of certain organizations. In the strategies to measure the achievements of objectives, budgeting can be used to show the proceeding. So in this case budget is used as indicators (Grieves, 2005 pp. 305). In other cases, budgeting is used as motivation to staff. If staffs of a certain company know that at the end of the year there will be something to measure their progress, then they tend to put more efforts in their day-to-day endeavors with the hope of achieving the intended goals. All of the above budgeting roles affect the product’s life cycle in the market. The life cycle of products has been increased by the issue of globalization whereby, the products are taking more time to be used after being manufactured (Bierman & Smidt 2006.pp 99). In the era of internet as a means of marketing, it takes more time to market for products, since the marketers are not face to face with the potential customers. Another reason is that it takes time to transport goods where they are required. Take a case of a company in china which is manufacturing mobile phones. Due to the high demand of mobile phones in Africa, the company has to transport the product to Africa to bring the products closer to the customers. By so doing, the life cycle of the phones will increase since it is taking more time in the hauling. Globalization therefore has affected budgeting of the organizations both negatively and positively. To discuss on the positive side of globalization to budgeting, many of the companies are using e-mail and internet to advertise their products. This in return is making the company to increase their sales therefore increasing in their returns which must reflect on the budget. Budgeting in some countries is funded by the global community. If a country is running on a deficit on its budget, it has to find other sources like the World Bank. If again the World Bank does not feel satisfied with the proposal, the country can depend on the international monitory funds. The issue of budgeting and globalization has led to a common market with the EU countries creating an integrated market for financial services which cuts of borrowing for businesses and customers and will offer saver and wide ranges of investment products. By so doing, the bank charges for cross-borders payments have reduced significantly (Peterson & Fabozzi, 2011 pp. 67). Globally, budgeting has been very crucial in managing global funds through World Bank, international monetary and other global monetary organizations. The word has been sailing through tough economic situations characterized by calamities, wars, famine and many more. These situations have been budgeted for by these international monetary institutions. The entire production process also requires budgeting since products follow phases or what is called product life cycle. In most cases, a product life cycle has four phases which are; introduction, growth, maturity and finally the decline stage. Internationally, many companies have realized that supply chain management initiatives have significantly amplified their profitability, reduced inventory, and enhanced their capacity to match supply with demand. The only challenge they have encountered is shorter product life cycle which have greatly affected supply chain management. Hence, the challenge in managing supply chain for products with short lifecycle calls for a sound budgeting (Fisher, 1997 pp 83). A budget also helps a person to plan for short term expenses, like monthly bills, midterm expenses, vacations, as well as long term expenses. When a person has a spread sheet showing how much he or she is expecting to earn or make, how much of that money is expected to be used, and the amount of money to be saved, then a person will successfully plan for all short term and long term expenses. Prevention of crisis is also another important role of budgeting. In case a significant expense arises unexpectedly, for example toothache problems, a budget helps in solving such unavoidable emergencies. When savings have been depleted by a recent emergency, a budget helps a person to determine what expenses one might be able to postpone or shift around to help in paying unexpected bills. It also helps in giving an idea of how long it takes to stock up depleted savings once expenses have been settled. Budgeting is an essential financial tool that has led to achievement of financial freedom. This ultimate freedom, of course, is being able to stop working, but along that winding path, there are opportunities for many rest stops if one has money in the bank. These rest stops are; starting a business, taking an extended vacation, having many children among others. This is an implication that budgeting helps one to achieve goals (Banks, 2008 pp 7). Budgets are also instrumental in assigning responsibilities. Since a budget is subdivided into potions, each portion gives different responsibilities and objectives that need to be attained, different people are assigned responsibilities which are in line with the budget. For example when a countries’ budget is read, ministers of various departments are always responsible for managing allocated funds. Others are given a responsibility of following up to make sure that no single coin is mismanaged or embezzled. A budget also helps in controlling activities by measuring progress against original plan. This is done through making adjustments where necessary. In case there is divergence between progress and original plan, then, necessary measures are taken so as to control such activities. In general, a budget helps to take remedial action whenever there is a deviation from the original plan. Globalization has also led to implementation of customer policies which permit any citizen from the member country to shop anywhere in the world. These have negative effects in the other country’s business because it has led to global economic recess. International Monetary Fund report indicates that in more than 50 countries, the governments are planning to fund their budgets using domestic borrowing (Bierman & Smidt 2006.pp 99). Due to difference in budget presentation, the governments have increased their borrowing from internal sources than external. These have led to deficits which are more domestic than international. Globalization has also led to rapid changes in trade relations, financial flow and flow of man power across the globe. This makes the development of national economies closer and intertwined. Globalization has led to many people relocating from their countries to work somewhere else in the world (Bierman & Smidt 2006.pp 99). Many careers practitioners are trained to worked anywhere else in the whole globe. This has helped in the issue of unemployment where people will go out and seek for the same opportunities somewhere else. Finally it helps the learners and business managers, in the sense that they will be required to find other ways of marketing and selling their products. These may be achieved by starting constituent companies in other areas, which will bring products crosser the potential buyers. There have been concerns in the whole world about environmental degradation due to increase of economic activities. These have stimulated starting of global meetings where solutions in attempts to control environment have been brainstormed for example the Kyoto protocol. Many governments have been forced to adopt environmental changes. In Europe and particularly in UK, One key measure through which adaptation measures due to environmental hazards has be announced or expressed to public is budget. In year 2009, many budgets in Europe governments included a number of green measures. The UK government allocated 4 billion pounds for renewable energy projects via European Investment Bank. They also had the world’s first binding near the term carbon budget, which committed UK government to cut carbon emissions by 34% by year 2010 (Nurdin, 2008 pp 187). National governments have viewed higher education as one of key determinants of economic recovery. Its demand therefore goes up during times of economic slowdown which has been the case in most nations, for example the Euro zone (Epstein 2010). This situation called for European zone leaders to meet and suggest the way forward in an attempt to solve that crisis. One of the measures that suggested was to avoid deficit budgets which would call for an increment in taxation. This means that budgeting is very instrumental in solving financial crisis and in recovering a currencies’ position. In regards to funding of higher education, many world governments, through international monetary fund and World Bank have been vibrant in budgeting and planning for higher education due to its impact on an economy as mentioned earlier (BBC World News 2009). The United Nations has also been concerned in the spread, how to control and to deal with implications of various diseases like HIV. In this case therefore budgeting has been used to allocate funds in various departments concerning such health matters. This world organizations also budgets for food to cater for famine stricken areas in the globe. Terrorism has been a threat for a long time although it has come down today. Given the fact that it is hard to predict a terrorist, budgeting for security measures has been undertaken by many governments especially in America and Europe who allocate more money in technology of making super weapons and in light of globalization where people can live, work, and school among others in any part of the world. In general, budgeting has had so many positive roles in today’s world and has participated in making it global villages since there have been support programs by rich nations to developing countries. If through budgeting world security is ensured, this will ensure a good working environment in all careers globally. Budgeting for improving technology also ensures that, more job opportunities are available in future. This is because technology boosts production and expansion of industries hence more jobs created. Furthermore, budgeting for higher education and vocational training will boost creation of more jobs (Epstein 2010). At an individual level, budgeting helps one to manage or plan expenditures and expenses. If this is taken as a habit, then it means that one will be able to manage a business more efficiently. Budgeting can also be taken as a career since we have very few budget analysts. Budget analysts mainly works in federal, state and local governments, and the minimum requirement for this job is generally a bachelors level but due to educational advancement, masters level is mostly preferred. In conclusion, the present world cannot do without employing this financial aspect of budgeting since it has so many advantages than disadvantages (Nurdin, 2008 pp 187). Nevertheless, budgeting has been hindered by politicians and other personalities involved in finances, who instead of using allocated funds in the right and responsible way, embezzle funds. To add on that, there have been cases where people budget for projects that is not productive. As budgeting on one side helps to solve financial crisis, its effectiveness has been affected by inflation caused by financial crisis. Therefore, budgeting should be handled with a lot of caution since it is one key aspect that will make the world a better place to be today and the best in future. Bibliography Epstein, J. (2010). Science Funding Gets a Boost, Inside Higher Education. (Online) available at: http://www.insidehighered.com/news/2010/02/02/scibudget (accessed on 23rd February 2012). Fisher, M. 1997. What is the right supply chain for your product? USA: Harvard Business Review. BBC World News, (2009). Universities Warn that Budget Cuts Will Be Challenging. (Online) available at: http://news.bbc.co.uk/2/hi/uk_news/education/8405680 (accessed on 23rd February 2012) Nurdin, G. 2008. International Business Control, Reporting and Corporate Governance. London: CIMA Publishing. Banks, A. 2008. Budgeting. Australia: McGraw-Hill Publishers. Bierman, H & Smidt, S. 2006. The Capital Budgeting Decision, Ninth Edition: Economic Analysis of Investment Projects. U.K. Routledge Grieves, M.2005. Product Lifecycle Management: Driving the Next Generation of Lean Thinking. New York. McGraw-Hill. Peterson, P. P. & Fabozzi, F .2011. Capital Budgeting. New Jersey. Wiley. Ronen, J & Livnat, J.1991.Accounting and Financial Globalization. Amazon. Quorum Books. Seitz, N & Ellison, M., 2004. Capital Budgeting and Long-Term Financing Decisions. California. South-Western College. Writers of Wise Bread, 2009. 10,001 ways to live Large on a Small Budget .New York: Skyhorse Publishing. Read More