Question

From a management perspective, why do you think budgets are important and give an example, that relates specifically to your major (business administration) of how you will use budgets in your field.

Answer 1

Budgets are very crucial for carrying out the routine and non-routine activities in the area. Without budget, it becomes difficult to manage the work and carry out smoothly. Example: My field is Supply Chain and Operations Management. In order to run a factor, there is a budget assigned each year under different categories like:

• Repairs and Maintenance - For machine maintenance etc.
• Operating supplies - For regular use like Oil, Paper etc.
• Outside services - For expense related to Annual Maintenance contracts, Painting etc.
• Salary & Wages - For employee
• Benefits - For additional perks in form of gifts for recognition
• Travel - This is car hiring, travel to different place for business purpose etc.

So, to use the budget in my field, I follow below process:

• Do zero based budgeting to find out cost or budget requirement under each head for an year
• Include all the new activities and remove the old activities for accurate calculation
• Compare it with the previous year budget
• Prioritize the activities with nature of expense
• Segregate the budget month wise and week wise for the entire year by planning the activities so that expense is equally spread out
• Reviewing the budget on weekly basis to ensure everything is on track

Hence, it helps to ensure that budget is within target