Budgeting is the process of formulating an organisation plans. The most important planning, evaluation and communication benefits depend on an effective budgeting process that engages employees throughout all levels of the organisation. Four major benefits of effective budgeting are: 1. Budgeting provides an opportunity for managers to re-evaluate existing activities and evaluate possible new activities. 2. Budgeting compels managers to think ahead by formalizing their responsibilities for planning. 3. Budgeting aids managers in communicating objectives and coordinating actions across the organisation. 4. Budgeting provides benchmark to evaluate subsequent performance.
The advantages of budgeting described previously are limited, in some cases severely, by problems associated with budgets. In this section, three problems that complicate the implantation of budgets: 1. Low levels of participation in the budget process and lack of acceptance of responsibility for the final budget. 2. Incentives to lie and cheat in the budget process. 3. Difficulties in obtaining accurate sales forecasts.

What external factors need to be considered?
External influences that are not in your control may have an impact on the success of your efforts. Having alternate plans or rethinking your strategies should be a part of your planning. Some external influences that can affect your financial planning include (examples in parenthesis):
Government or national policies and legislations (the Poverty Reduction Strategy that may affect the way governments address poverty)
Natural disasters or epidemics (drought that affects the people you are working with)
Political conditions (elections that may disrupt daily life or cause instability)
Global economic forces (changes in global market prices for the commodity that farmers are producing)
Local