Question

1. Why do businesses use budgets?
2. What information can you learn from a business about its priorities from reading its budget?
3. What would you change about the budgeting process if you could change one thing?

Answer 1

1. Budgeting means making a plan to spend the money. The spending plan in the business is called a budget. A budget is a plan to control the finances of the business and enable the business to meet it objectives and make confident financial decisions. A proper budget also helps to make sure that the business has money for future projects. Further knowing where the budget stands opens up the ability to hire new staffers, invest in new product lines and set earning goals in line with the organizations’ corporate financial objectives. Budget can also help to attract investors and plan well for tax preparation.

2.  Information can you learn from a business about its priorities from reading its budget are as follows:

Investments: Investments to be made to support growth and Investment which a business should make.

Research & Development: Any research and development expense.

Employee Satisfaction: How much you care about employees’ health, lifestyle, and overall well-being.

Costs Effective: Budgeting estimates revenue, plans expenditure and restricts any spending that is not part of the plan.

3. A lot of time and effort are spend to prepare a budget. Most organizations create their budget only once a year, and few have the ability or the willingness to adjust it in the meantime. The finance departments should embrace driver-based models which will help in determining the drivers of major costs, then considering them according to two variables, rate and cost.