Question

relate each step of the corporate budgeting process to corporate decision making.

Answer 1

Corporate budgeting process to decision making:

• Planning: it is at this stage that managers create a detailed financial plan. Hence at this stage budgeting would encourage an organization to articulate its vision, strategy & goals.
• Using last year information: historical information on sales& costs are collected by the organization. This can be a good indicator of how the current sales would be. It can also help the organization to make important decisions like cost cutting, changes happening with the competitors based on which the organization would plan for its product.
• Creating real budgets: in this stage the budgets are created with the help of historical information. The relationship between variable costs & sales is worked out at this stage & also sales forecast is used to project the variable costs. Hence at this stage the business can monitor various key drivers like sales, costs, working capital etc.
• Involving the right people: at this stage the organization makes the important decision of employing the right people for the right job. The staff is given the financial responsibility to provide with estimates of budget figures like sales targets, production costs or specific project control. This can also give greater commitment to meet the budget.