Budget Planning And Control Management

Good Essays
Budget Planning and Control
According to our text a budget is a formal written statement of management’s plans for a specified future time period, expressed in financial terms (Wiley, 2013). An effective budget gives a company command and control over financial resources. It helps a company to plan and achieve their strategic and organizational goals. There are many reasons for a company to prepare and manage a budget, such as assisting with performance evaluations and identifying possible constraints and limitations.
The budget is an important basis for evaluating performance. It can provide benchmarks against which to judge success or failure in reaching goals and facilitates timely corrective measures (Bragg, 2010). Budgeting forms the baseline for a company 's future performance. Managers create the budget anticipating financial conditions and market expectations for future periods. These managers calculate revenues and expenses for the period being budgeted. When the period reflected in the budget arrives, the managers compare actual expenses to the budget numbers and evaluate the department 's performance (Bragg, 2010).
Another advantage of budgets is that they can be instrumental in identifying constraints and bottlenecks. The earlier example of the power plant well illustrated this point. Efficient operation of the power plant was limited by the supply of
Get Access