The paper "Budgeting as the Act of Quantifying Objectives and Plans in Financial Terms " is a perfect example of a finance and accounting assignment. Forecasting is termed as the making of calculation attempts with the aim of knowing what the future holds. It is important for companies to have a forecast to work with as it assists one to be prepared. Forecasting requires a company to consider a number of variables with regard to the actions of the government, price and demand relationship, actions of the competitors to name a few.
Therefore, a well-written budget assists companies forecast on the future endeavours. Control and coordination The ability of a budget to assist in controlling and coordinating is very essential for organisational growth. Coordination means ensuring different operations of a business work n congruence. Budget is able to expose weaknesses in business operations and undertakings so that new plans can be made to make up for it thus allowing smooth control and coordination. Motivation Motivation is considered an enabler that makes people determined to achieve set goals. Budgeting impacts the motivation of the employees. There are two methods that can make employees heed towards a budget; authoritarian method and participatory method.
Budget can be very difficult or very easy. In order for a budget to motivate staff, it should be easy to comprehend. Communication A budget acts as a communication tool. For instance, information about an organisation’ s operations and its competitors is gathered during budget making where there is consultation between managerial staff. Such information can then be analysed and criticised for altered information to be generated. Also, a budget has inbuilt information dissemination capabilities that allow accurate information to be accessed. Allocation of resources A budget assists in minimizing misappropriation and embezzlement of resources in an organisation.
Through authorization, directors and managers are more accountable for resource allocations and spending. In addition, a well-prepared budget can allow managers to consider other alternative uses of the resources in an organisation. Failing to meet a budget A budget is considered an estimate of the future with regard to already known information. A budget is a reflection of the organisational goals and strategies set in business. Therefore, meeting a budget is very essential to organisations.
However, sometimes problems meeting the budget may occur owing to how managers use the already provided information in the budgetary system and the feedback received from the information. Projections of any business should be realistic and quantifiable. When projects are out of line; either up or down, the management should question the budget set. For example, a sharp projection of costs is expected to have real-world justifications. Sometimes managers are tempted to raise budget targets that are unrealistic. If a budget is honest and realistic then the right projections will result.
Budgets are sometimes considered 50% guess-work and with unrealistic adjustments. For instance, a manager might not be able to meet a set budget due to budgetary slack where there is over-estimation of budgetary expenses. Budgetary slack may interfere with proper organisational performance because employees only have an enticement to meeting their budget. In addition, the budget difficulty may occur when targets set are considered unachievable. Therefore, not meeting a budget target not always means that an operation or activity is unsuccessful. Budgets should, therefore, be set at levels where they offer a challenge but are attainable.
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