Budgeting Is The Main Goal For Profit Planning

905 WordsNov 24, 20144 Pages
Budgeting is the main goal for profit planning. All businesses should prepare budgets; all large business does (Mowen and Heitger, 370). Budgets are financial plans for the future and are the key component of planning (Mowen and Heitger, 370). Planning and control correspond to each other in an important and dynamic way. Planning is looking ahead to see what actions must occur to realize specific goals. In addition to planning, control is looking backward to determine what happened and compare it with previous planned outcomes. Before a company set a budget, they must create a strategic plan. A strategic plan identifies a future business activity that usually covers in at least five years. There are advantages of budgeting which, are provides information that is used to improve decision making, provides standard performing evaluation, improves communication and organization. It is important for you to have a sales budget. A sales budget should agree with the budget committee and it should describe anticipated sales in units and dollars. Sales budgets are the basics for the other operating budgets and it is important that it be precise. The formula for a sales budget is units multiplied by unit selling prices, which equal budget sales. For example, the budget units to be sold each quarter is 1,000 and selling price is $10 would be 1000 x $10. If a company has a large number of products, it usually aggregates its expected sales into a smaller number of product categories or
Open Document