Budgets
A budget is a financial plan which is designed so that businesses can fund resources and achieve
their overall objectives. A business will calculate and set a budget that they will work towards for
the future.
There are different types of budgets such as:
Sales
Production
Labour
Production
Cash
Benefits of Budgets:
Planning Orientation: Making a budget means that management can look at the funds that the
business has and plan what they can do in a future period with the funds that they have. By
planning in a business it helps to see how much is being spent on resources and departments and
can help to find areas that do not need as much funding.
Profitability Review: By producing a structured budget to follow it helps a business to look at the
funds they have available and where they can be used. It helps to stop the company becoming
confused with financial figures. They can look at the parts of the business that they could expand
on and the parts that need cut back.
Assumptions Review: Management can use budgets to look at the performance of their business
and what is running successfully for the customers to be attracted to their store. By looking at this it
can help a business to be able to decide on how the business operates and change anything
necessary.
Performance Evaluation: When budgets are set it helps the employees of the business to meet
their goals and know what they need to be achieving to get incentives and rewards which can
increase their job motivation. The business can also look at how their staff are performing and can
set the budget off their performance.
Funding Planning: By having a budget set it can help to control the funds that are given to different
departments and can help to save money for expansion. The businesses accountant will look at
their financial information and identify any improvements that could be made and if the business is
successful with their funding and what they could use it on.
Cash Allocation: Budgeting will help manage the limited cash that a business will have and the
amount that is needed to spend on each department for the business to run normally and what is
worth investing in.
A budget is a financial plan which is designed so that businesses can fund resources and achieve
their overall objectives. A business will calculate and set a budget that they will work towards for
the future.
There are different types of budgets such as:
Sales
Production
Labour
Production
Cash
Benefits of Budgets:
Planning Orientation: Making a budget means that management can look at the funds that the
business has and plan what they can do in a future period with the funds that they have. By
planning in a business it helps to see how much is being spent on resources and departments and
can help to find areas that do not need as much funding.
Profitability Review: By producing a structured budget to follow it helps a business to look at the
funds they have available and where they can be used. It helps to stop the company becoming
confused with financial figures. They can look at the parts of the business that they could expand
on and the parts that need cut back.
Assumptions Review: Management can use budgets to look at the performance of their business
and what is running successfully for the customers to be attracted to their store. By looking at this it
can help a business to be able to decide on how the business operates and change anything
necessary.
Performance Evaluation: When budgets are set it helps the employees of the business to meet
their goals and know what they need to be achieving to get incentives and rewards which can
increase their job motivation. The business can also look at how their staff are performing and can
set the budget off their performance.
Funding Planning: By having a budget set it can help to control the funds that are given to different
departments and can help to save money for expansion. The businesses accountant will look at
their financial information and identify any improvements that could be made and if the business is
successful with their funding and what they could use it on.
Cash Allocation: Budgeting will help manage the limited cash that a business will have and the
amount that is needed to spend on each department for the business to run normally and what is
worth investing in.
