Question

Budgeting is generally thought to be an important function within an organization from a planning, control, and performance assessment perspective. Discuss whether you believe that budgeting process should be a priority in the organizationn and why or why not. Be sure that you address the planning, control, and performance assessment characteristics of operations in your response. Ensure your response addresses budgeting of income, balance sheet, and cash flows.

Answer 1

What prevents people from controlling costs or conserving resources is that they cannot see the direct connection between their job activities and their company’s profits. Part of your job is to help your coworkers and peers see how the work they perform impacts the bottom line. You can accomplish this by involving every employee in the budget development process. Ask them what they need to better accomplish their goals, issues they are seeing, or ideas to pursue.

a fiscally prudent budget makes an investment in the present, as well as the future. The budget does not borrow from the future to fund today! If any one of the strategic goals listed on the budget is not met, then it should not put the company in financial distress. Finally, all the decision makers, executives, owners, and employees need to believe the budget is realistic, or else it risks not being a fiscally prudent budget.

In comparison, one creates a well-conceived budget at a strategic level. It is developed in conjunction with the firm’s planning process. Furthermore, it utilizes the business acumen of an employee in the trenches. For example, an employee in the trenches is serving the customer or making the product. They are the first line of your company. They have continuous feedback built in that informs the leaders whether a strategy is realistic or not. The leadership has to be in tune with their front line. In addition, a well-conceived budget includes the interests of all the organization’s stakeholders. Then develop the budget by consensus.

In the end, a good budgeting process enables you to better manage your cash flow and adapt when needed.