BENEFITS OF BUDGETING TO BUSINESS

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Budgeting is the process of forecasting and estimating the revenue and expenses for a future period of time. It is the process of planning financially for an organization for a given period.

A budget can be made for a person, family, group of people, business, government, country and any other entity that make and spend money.

The following are some of the benefits of budgeting for businesses:

1. Helps in planning: Budgeting is critical for successful business planning.

This is because budgeting allows business owners and managers to forecast how a company will perform financially if certain actions and strategies are taken.

2. provide a mechanism for evaluating departmental performance: To help the organization accomplish its financial goal, strategies are established and each department is assigned particular targets to meet.

Budgeting can be used to measure performance against particular objectives since it assigns precise goals to each department, making performance evaluation easy.

3. Necessary for controlling: Controlling is the managerial function that allows managers to evaluate current organizational performance to see determine whether things are going as planned.

With a budget in place, managers can control the financial activities of the business by comparing actual spending to the budget.

4. Decision-making tool: Budgeting provides a framework for making financial decisions.

In other words, It provides a framework for determining the course of action to be taken by the business.

When the business's postal budget is exhausted, for example, the decision of "can we spend money on postage" will be no.

5. Efficient Resource Allocation: A Business have a limited amount of resources. As a result, it is critical that these resources are allocated effectively.

Managers use budgeting to determine which resources go to which members and departments, ensuring that no resources are wasted.

6. Control expenses: Without effective planning, a company would spend money whenever it is available, without regard for accountability.

With a budget in place, however, every person in the organization will have their spending planned for. This ensures that all expenses are properly accounted for, as well as reduces cost overruns.

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