I agree to the statement “Management of any business will be ineffective without the preparation and use of budgets”. What is budgeting? Budgeting is the continuous cycle of planning and evaluation used by a company in order to achieve the stated goals and objectives of the organization. The process of allocating a finite amount of resources to the prioritized needs of the organization and a tool we use to control spending decisions. An entrepreneur needs to plan for his business’ future and he/she must plan for the future. Budgets usually show a clear representation of how the business wishes to spend their funds in the future. Many businesses create budgets on an annual basis in order to carefully outline the expected requirements of various departments in the company. With the annual budget process it also reduces the amount of time businesses spend for the creation and management of capital. While larger companies accountants or other professionals have employed to create a business budget, small business owners are usually responsible for the implementation of this feature alone. “A budget is just a method of worrying before you spend money, as well as afterward." (NA, 2013)
The role of budgeting in the management of a company is very effective when it is related to the fundamentals of management. The many existing definitions of the operations usually expressed in terms of the five main functions: planning, organizing, staffing, management and control. Management must plan first. Organizing, the staff and management operations will implement the plan. To verify operation management must set appropriate techniques of observation and reporting, in order to determine how they compare to the plans. Actual results budgeting focuses on the planning and control functions of management.
Budgeting can be used as a planning and controlling system if done properly. In