Management Accounting Budgeting
For the success of the business, the budget should be followed and ensure that the budget is constantly reviewed to maintain the organization's goals. The budget should also be known by all the players in an organization in order to ensure that the organization reaches its goals. A budget is a rough estimation of the revenue and expenses that a company or business may get over a specified future period of time. This is reevaluated and compiled on a periodic basis. For a budget to be a successful budget, the budget should have accurate income projections of the whole company. It also helps in motivating the employees. This is true as the budget gives the employees goals and targets for them to beat.
However, the budget needs to be realistic as if the targets are set too high or too low it might end up demoralizing the employees and thus low productivity. There are different steps to planning and control cycle. The first stage is to set a mission. g. making new products for new markets and developing new markets for existing products. The fourth stage is gathering data about alternatives and measuring payoffs. The next stage is to select a course of action based on the data collected. The organization can then implement short-term plans and eventually monitor the outcome. Getting the expenses and liabilities right is crucial because if it is wrong, the organization might think that it has more money to spare only for an unseen expense to show its ugly head.
The business should then state its objectives and prioritize the funds to what the business needs to improve. the business only has a finite amount of money to allocate. Therefore, there should be prioritizing on the projects that are crucial to the business growth. Budgetary control is the process in which actual income and spending is compared to the planned or projected income and spending to see if the organization is sticking to the to the plans or not and if those plans need to be changed for the better. This is the main factor that the budget is based on. Most of the time, the principal budget factor is the sales volume or the profit. It can also range from availability of expansion space to reduced expenses and liabilities.
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