In this essay I will write about corporate budgeting system and why companies should make it carefully. To begin with I'd like to explain what does «budget» mean.
A budget (from old French bougette, purse) is a financial plan and a list of all planned expenses and revenues. It is a plan for saving, borrowing and spending.[1] A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods. In other terms, a budget is an organizational plan stated in monetary terms.
In summary, the purpose of budgeting is to: 1. 1. Provide a forecast of revenues and expenditures, that is, construct a model of how our business might perform financially if certain strategies, events and plans are carried out.
Enable the actual financial operation of the business to be measured against the forecast.
Organizations develop specific plans for saving and spending income and these plans, or budgets, are essential for developing spending and saving priorities. Properly preparing a budget also serves as a reference to check how well money is being managed during a period by allowing managers to see actual revenues and expenses compared to budgeted revenues and expenses. Corrective action can be taken earlier in a period when revenue shortfalls or expense excesses are identified.
The term "budget" can be dated back to medieval England, where it meant "leather purse" or "wallet." A budget allows businesses to meet specific goals by creating a system of saving and spending money efficiently. Simply defined, a budget is a plan for using corporate funds in a way that best meets the firm's wants and needs. The plan includes a recorded entry of expected income, expenses, and savings over a defined period of time.
A wide range of budgeting techniques exist, and although the fundamental purposes are similar, the specifics among