In: Accounting
Please explain the Budgeting process step-by-step and provide an analysis of why a company needs to perform such an analysis.
Every company should have a well-thought-out budget that considers the goals of the company, the motivation of employees and the financial limitations of the company. Additionally, the company should consider both the previous financial and business activities of the company as well as the goals the company holds for the future.
Setting Objectives = Before figuring out the company's budget, the budgeting committee or other key decision makers must set objectives for the future of the company. Objectives could include cost savings, for example, which would require a very different form of budgeting than objectives for expanding a company to a second location.
Determining Available Resources = A business's objectives should influence the budgeting process but certainly should not dictate it entirely. A business also must analyze available resources and determine what it has available to reach its objectives. Indeed, the available resources may dictate, to a large extent, the company's objectives. Available resources are not limited to the cash the company has available but also could include potential loans or additional outside investment. Additionally, a company must consider its sales projections for the coming year.
Projecting Future Needs = A budget is forward looking and requires some amount of estimation. It is obviously impossible to predict with perfect accuracy what your organization's future budgetary needs will be. There are, however, some important sources of data you can look at to reach an estimate. These sources include past company data, any available data on competitors and an analysis of current and developing economic and regulatory trends that may make the coming year different in any way from previous years.
Match Future Needs to Available Resources = More often that not, your available resources will not fit perfectly with your projected future needs. It is at this phase of the budget cycle that you may need to do some compromising and negotiating among your departments to determine how best to allocate your company's scarce resources. You must keep the business's priorities and strategic needs in mind when going through this process.
Obtaining Final Approval = Once you have a complete budget worked out, the next step is to acquire approval from the budgeting committee or whatever entity is empowered to make the final yes or no decision on your budget. The more rigorously you have worked to address the needs of all of the key stakeholders during the previous steps, the smoother this process should be.
Distributing the Approved Funds = Once the budget has been finalized and approved, the final step of the budgeting process is to distribute the allocated funds to the various departments and business segments. Typically this is the duty of a chief financial officer or company controller.
Monitoring and Evaluating = Once the budget has been finalized and the funds distributed, the budgeting process is not over. You should still actively track the success of the budget you have created and implemented. Look for areas where resources are lacking or where waste seems to exist and keep these areas in mind for future budget cycles.
Why Company needs to perform such an analysis :-
A analysis tool that helps a companyidentify the key drivers for change and determine the best options or solutions to resolve issues or improve productivity or performance. The purpose of the business needs analysis is to clearly understand the business and its needs.
Introduction to company analysis
Company analysis is a process carried out by investors to evaluate securities, collecting info related to the company’s profile, products and services as well as profitability. It is also referred as ‘fundamental analysis.’ A company analysis incorporates basic info about the company, like the mission statement and apparition and the goals and values. During the process of company analysis, an investor also considers the company’s history, focusing on events which have contributed in shaping the company.
Also, a company analysis looks into the goods and services proffered by the company. If the company is involved in manufacturing activities, the analysis studies the products produced by the company and also analyzes the demand and quality of these products. Conversely, if it is a service business, the investor studies the services put forward.
How to do a company analysis
It is essential for a company analysis to be comprehensive to obtain strategic insight. Being a thorough evaluation of an organization, the company analysis provides insight to rationalize processes and make revenue potentials better.
The process of conducting a company analysis involves the following steps:
6 Principles of Needs Analysis