Essential Business Budgeting: Purposes and Challenges

Budget is a comprehensive schedule of scheduled financial activities over a specific time duration. Another way of expressing this is that budgeting is essentially a system that permits business to achieve its objectives and goals from time to time.

In moderns now, developing a budget plan has ended up being an extremely crucial action in every company. There are many purposes that can be served by implementing a spending plan system. Thus through this budgeting procedure, there are 5 significant purposes that can be dealt with which is preparing, interaction & & coordination, allocation of resources, controlling and examination.

Preparation is probably one of the most apparent purposes of budget plan. That it enables an organisation to quantify its incomes and expenses from a previous time period and then make forecast of where the service might be at in the future, For instance it could permit business to include or remove items and services in order to satisfy the awaited need of the firm for the period.

Get quality help now
Doctor Jennifer
Doctor Jennifer
checked Verified writer

Proficient in: Budgeting

star star star star 5 (893)

“ Thank you so much for accepting my assignment the night before it was due. I look forward to working with you moving forward ”

avatar avatar avatar
+84 relevant experts are online
Hire writer

Interaction &  coordination is likewise really important. For a service to run efficiently and effectively excellent communication and coordination is no doubt needed within business. The spending plan can also permit the management to communicate and promote its objectives in a profitable manner so that resources can also be coordinated and focused in the crucial areas. Another significance of having a smooth communication and coordination might well lead to inspire staff members by including them in the budget plan itself.

Allotment of resources is constantly an issue to all business or maybe the whole world.

Get to Know The Price Estimate For Your Paper
Topic
Number of pages
Email Invalid email

By clicking “Check Writers’ Offers”, you agree to our terms of service and privacy policy. We’ll occasionally send you promo and account related email

"You must agree to out terms of services and privacy policy"
Write my paper

You won’t be charged yet!

In general, all resources are minimal and it is no different to business firms. For that reason by using spending plans might make it possible for business to allocate its resources adequately through competitors. Suggesting that in big companies, various departments might aim and complete for the restricted resources needed.

Managing over expenses need to be regarded by every company, such that an overload of costs could be prevented if they are not allocated for. For example the real sales and budgeted sales can be reported on a weekly basis instead of month-to-month basis to help the sales staff to exercise some control over the total sales.

The last purpose would be evaluation and it is highly useful in this case. By comparing the actual results and budgeted results could allow managers to evaluate the overall performance of an individual, departments or the entire firm its self. Thus it can also provide incentives for a better performance in the next time period from the results taken.

However there are also some negative aspects that also need to be considered. To create a successful budget plan can be quite difficult where the budgets formulated will need to correspond to the overall strategic plans of the business. Accurate forecasting can also be very troublesome at times for the managers to estimate as well where internal and external factors needs to be taken into account. For example when forecasting sales, the managers will need to consider the past level of sales and trends for the company as well as the general economic trends of the nation.

In conclusion I think business budgeting is still a crucial procedure that all businesses should and must go through, It is a great tool that allows the business to communicate and achieve its goals and allow them to monitor those achievements as well as a very important step in the overall businessstrategic planning.

Updated: Nov 30, 2023
Cite this page

Essential Business Budgeting: Purposes and Challenges. (2016, Aug 02). Retrieved from https://studymoose.com/purposes-of-budgeting-essay

Essential Business Budgeting: Purposes and Challenges essay
Live chat  with support 24/7

👋 Hi! I’m your smart assistant Amy!

Don’t know where to start? Type your requirements and I’ll connect you to an academic expert within 3 minutes.

get help with your assignment