Question

Budgeting and long-range planning are both important aids to management in achieving a company's goals and objectives. Briefly distinguish between budgeting and long-range planning and indicate how they help managers perform their functions.

Answer 1

Long Range Planning

For individuals and households, long range plans include goals such as career changes and family planning, along with developing the financial outline for how and when you will achieve these goals. You may need or want to develop a checklist that enables you to determine whether you are making progress. Over the course of time, your goals may change, resulting in the need to alter some aspects of your plan or even to start over from scratch.

Budgeting

Many people are familiar with budgeting; it is an important aspect of financial planning for many households. Your household budget may include items such as rent or mortgage payments, a car note, education or retirement savings allocations for utilities, groceries and other necessities. A budget may also include items such as an emergency fund and investment instruments. A ledger or other means of record-keeping determines whether the funds available are adequate to meet the needs at hand.

Difference between budgeting and long range planning-

Specified Versus Open Ended Period-

While the financial specifics of each household or organization are different, every budget deals with the concrete financial aspects of a household, business or other entity for discrete period of time -- a month, a year or sometimes longer. A long range plan looks beyond the immediate financial horizon; in many cases the time frame involves several years. Neither a finite or an open ended framework is intrinsically "better"; both immediate, concrete budgets and long range planning have a role in promoting financial well being.

Maintenance Versus Vision-

Budgets deal with the here and now as well as the near future. A budget where finances are adequate illustrates where the money is going. A budget where finances are inadequate may provide insight about where problems lie as well as possible areas where adjustments can and should be made. The main focus of a long range plan is not necessarily on money, but rather on illustrating strategies and actions for achieving desired goals that may or may not involve finances.

budgeting helps manager-

A budget is a comprehensive financial plan for achieving the financial and operational goals of an organization. Used correctly, a budget is the map of the company's strategic plan. In creating the budget, the company is developing its objectives for the acquisition and use of its resources.

long range planning helps manager-

1)Mission and Vision Statements

Long-range business goals make business teams and individuals accountable for moving forward a company's mission and vision. The mission statement articulates the purpose for the organization's existence.

2)Forecasting

Long-term business planning involves developing long-term goals based on assessing historical sales and other operating data. Using forecasting techniques in business planning helps leaders make informed predictions that can be used in developing long-term goals.

3)Direction and Motivation

Long-range business planning helps business leaders to think differently about the company's direction. It also provides motivation and insight into the type of performance necessary to meet business goals. This is especially important when significant internal change is required to maintain competitive advantages.