Question

Budgeting is an essential activity organization. managers should relate budgeting with the company's vision, mission, strategy and long term and prepare a budget as a form of refined annual plan that detailed the firms route towards achieving the projected annual performance. Debat the above statement.

Answer 1

Hey there. I am presenting the write-up in an easy to understand and fun language to keep the listeners engaged as we have to 'debate' the statement.

Results. This is what every organisation work towards. Every organisation is measured up and down through the numbers. How profitable it is, how efficient it is and how cost effective it is. This is an age where information travels very fast and has great impact. The image of a company, its good name and reputation may not travel too far, but a good balance sheet and declared profits reach far away audience easily.

And how do we get the desired numbers? Should we just work hard through out the year and when we close the books, just hold our hands and pray to god that some good numbers crop up in the books so that everyone can be happy. I wish this could be the case.

We have to make a goal and plan to achieve that goal. For this, organisations make projected annual performance reports, a place and a financial position where the management expects the organisation to reach. Targets are set, both financial and performance targets and are communicated to all he responsible managers well in time, so that they can plan their activities to achieve those targets. Here, planning is crucial. So enters budgeting.

Budget is an estimation of revenue and expenses over a period of time. How much we are going to earn and how much we are going to spend to get that earnings. It involves deep planning and estimation for the coming year. It is a actionable plan which is needed to achieve the performance target set by the top management.

Now, once the targets and expected performance standards are communicated to the managers, they have to sit and plan how they are going to achieve those. The managers have to think the larger picture, what exactly their organisation stands for, what is the long term vision of the company, what is the mission of the founders of the company and what strategy the company adopts to make its position in the market and increase its share both in market share and revenues. So the managers have to see that they don't cut the costs in the areas where the company specifically focuses for quality and stands apart in the market. They don't compromise on the promises the company makes to its consumers. The sales team makes the revenue targets and develops strategy to acheive those but doesn't teach its work force to make false promises to the customers. Similarly the procurement team has to negotiate hard to keep the costs low and under budget, but they also don't cheat their suplliers and deal fairly with them. If the company also focusses on the environment and the society it operates around, the spending on that front is also accounted for and made sure that it is sufficient as per the mission and the vision of the company.

The planning should never lose the long-term perspective and should never be the fast and short-cut approach to just achieve the targets and should be prudent and made with the coming years in mind. So budgeting is very important for achieving the annual performance targets. Without it its just a blind race. But blindly making the budgets without keeping the long term perspective in mind is also foolish. Every action should be planned keeping the vision and mission of the organisation in mind and then only is the organisation able to sustain the performance in the long run.