Importance Of Budgeting

A budget is defined as the quantitative allocation of organizational resources for particular operations and plans for a forthcoming time. They usually serve as the financial blueprint for the company basing on its goals and objectives. Effective budgeting makes significant contributions towards enhancing the efficiency of execution of organizational functions, implying that improper budget can jeopardize the achievement of the goals and objectives of the organization. In addition, excellent budgeting processes should match the business needs of the organization. Also, excellent budgeting functions as a framework for organizational planning and control, whereby the organizational goals and objectives are represented quantitatively in financial

This means that a plan indicates what the goals and objectives of the organization at some point in the future. Organizations usually have some variables that it should control, which may include the financial resources, the production methods, human resources and organizational assets. Forecasts and planning are an important aspect of the planning process that takes into consideration the external factors affecting the business operations, which the organization has no control of. Such variables include actions undertaken by the government, the spending habits of the consumers, the interest rates and the strategies adopted by the competitors. Owing to the fact that the management of the organization is not in a capacity to influence the external factors, its planning and budgeting should be confined within the controllable variables. This implies that planning entails what the organization is going to do in relation to the variables that it has the capacity to control. The management of an organization can use excellent budgeting to aid the planning

This implies that the people responsible for the budgeting process should take into account he values, strategies and plans of the organization. In addition, cost efficiency and effectiveness is required and that the knowledge of the resources required to generate the revenue for the strategic plans should be effectively allocated. These pre-requisites are essential when making the extensive use of human resources during the budgeting process during the planning, controlling and allocation of the organizational resources. The implication of this is that organizations should make use budgeting teams that are of an optimal size in order to eliminate the potential discrepancies when forming the