Budgeting Case
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“Budgeting is the key component in management short and long term planning.”
I agree with the statement that budgeting is the key component of short and long term planning. As budgeting can act as the planning and controlling scheme while conducting management proposed plans or the companys future objectives. Serving as the key component of management planning in terms of short and long term, budgeting mainly helps in decision making upon planning the desired goals of the company. It also helps to see the possibilities in terms of flexibility and risks while planning. Therefore, the plans will then be based from realistic sources.
Budgeting is demarcated as managements quantifiable manifestation of strategies for an impending period. Budgets are organized at numerous stages of a company. Budgeting, when made accurately, can symbolize as a planning and controlling procedure upon dealing companys goals. The companys objectives and performance aims are recognized in financial statements. When it is articulated, these plans are used throughout the year. The role that effective budgeting plays in the management of a business is best understood when it is related to the fundamentals of management. The benefit of having budgeting in the short and long term planning is once the company meet any perilous situations such as loans are required to establish a business and in any mode the management have decided to enlarge their business. Budgeting aids to relate loan for business set up and would persuade creditors to divide out the loan in a preparation for the proposal, which makes them understand the situation and how the money is going to be spend. Budgeting also stipulate an operative budget so that creditors will develop a trust in the company and will be able to guarantee that their money is in safe hands.
Budgeting is the important factor on short term planning as it helps to specify larger evidences and information. The budget may be sketched up by formulating a general budget for the company, which is then fragmented down into more comprehensive budgets for the diverse portions of the projected plans of the company as it is still essential to arrange a detailed budget so that the team do not tend to overspend on a minor matters. Also, budgeting is one of the primary tools used in in order to plan for cash flow in short term planning because a good cash budget permits the owner to comprehend short-term monetary requirements and opportunities for the business.
Aside from short term planning, budgeting is equally important in long term planning. It increases the flexibility and possibilities of each goal, which also helps in to settle the targeted budget for the certain plan. Budgeting also evaluates the projects that the company undertakes so as to start the programs