Budgeting Process

1488 Words Mar 13th, 2007 6 Pages
Budgeting Process
Budgets are often met with much hesitation. Often times, managers feel that the process is often too long and really does not help them run their departments or business. Let¡¦s explore the various stages of the budgeting process and evaluate their effectiveness. Then review how the role of the budget could serve as an analytic tool and be used to evaluate organizational performance, eliminate inefficiencies in an organization's performance, and be a part of the business control cycle. How can a company go from point A to point B? According to Leading Edge Alliance, a budget is like a roadmap for business growth or driving directions (2007). What does budgeting entail?
The Process
Budgeting is the process of: identifying,
…show more content…
Again, more information can help provide a clearer picture of future results.
Summarizing is the part of the budgeting process that entails relating the short-term activities to the company¡¦s long-term goals and establishing performance measures in relationship to budget activity. Finally, communication during the entire process is critical to the company. Budget information must be communicated to the individuals who are accountable for a particular department. Remember it is the directions that will allow them to take their department from point A to point B. Management can set expectations and coordinate the activities. It is at this point, that management can challenge and motivate their staff with the establishment of performance measures that have rewards tied to them (Cingoranelli, 2006).
Analytical Tool
Budgets can also be used as an analytic tool to evaluate organizational performance. ¡§Budgets are useful because the preparation of a budget forces management to plan. In addition, the budget provides a benchmark against which to compare actual performance¡¨ (Marshall, et. al, 2004).
Managers are responsible for carrying out plans. They are expected to undertake specific tasks, make the necessary decisions and manage staff. Budgets help to assess levels of success