Question

What is a budget? What purposes does it serve? As a manager what is role in developing and monitoring a budget?

Answer 1

BUDGET is a financial plan for a defined period, often one year. It may also include planned sale volumes and revenues, resource quantities, costs and expenses, assets, liabilities and cash flows. It is the sum of money allocated for a particular purpose and the summary of intended expenditures along with proposals for how to meet them.

PURPOSE behind preparation of budget :- Generally budget is prepared for resource allocation, planning, coordination, control and motivation. For the managerial level it is helpful in decision making, monitoring business performance and forecasting for the efficient and effective allocation of resources and to achieve desired objectives. Budget is the root of financial framework of important decisions. Budget provides information on how much a business can spend every month to have a record over business expenditure and its performance.

As a MANAGER role in developing and monitoring BUDGET :- Budget managers evaluate the financial needs of an organization, developing budget strategies to increase the company's profitability. The role involves preparing budget reports, presenting recommendations to executives, and monitoring expenditure. Managers generally perform following duties-

1) Interpreting financial information

2) Formulate business plans

3) Providing financial advice

4) Building relationships with external organizations

5) Produce expenditure reports.