Question

An operating budget is used to communicate plans to:

Answer 1

An operating budget is and a plan of an organization which is to be followed and implemented, It helps the organization to achieve its targets and with a strategy and a clear idea of what to do in the upcoming period, and how to go along with the organization objectives.

Initially, the top level management forms the organisation vision and mission statements, based on the various analysis of the past performance and to meet the needs and demands of the market and to take the opportunities in the market, It prepares both the operational revenue and expenditure budgets.

• The person who charged with governance will prepare and provide the plans to each separate divisions their plan and discuss and guide, implement and review the results from time to time from the reports.
• Each division such as sales, marketing, production each department managers will be given each a specific budget
• The performance of each department monitored by top-management
• In details again each department get works allocated by the department managers to the senior managers and lower level workers and assistance

All these are reported and communicated to the stakeholders about the performance of the organization with the help of reports given by the auditors and other consultancies the share views and verify the procedure and policies to be followed at a regular interval of times, then the achievement and progress of the company will be improved, An operational budget is an analytical tool to measure the organisation performance as a whole and also department wise, and to identify the mistakes and rectify,

Hence it is communicated from the top hierarchy level to the lower assistant level towards an organisation goal and also communicated to the stakeholders.