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What is Budgeting, its benefits, problems and solutions?


Budget=

Budget can be explained in many ways for instance a budget is a financial planning for achieving organizational goals. It is the activity which can also be described as the planning of meeting maximum expenditures with the help of available resources.
Every consumer uses available resources to meet expenditures and to fulfill basic and other needs according to his/her budget line.

Budgeting=

Budgeting is the process or the system in which budget is prepared, controlled and planned to be implemented for the purpose of organizational goals.

Preparation of budget: In this step financial experts review the financial situation of an organization and the goals to be achieved through which these experts prepare budget.

Planning of budget: In planning of budget objectives developed for acquisition and how the resources will be used.

Controlling of budget: In controlling, management takes all the necessary steps needed in order to make sure whether all the goals and objective of an organization being achieved or not yet.

Benefits of Budgeting =

It takes a lots of effort to make proper Budget for any organization however it also contains many benefits for an organization. Through Budgeting management can plan for dealing with uncertain things in order to secure and complete organizational objectives. Budgeting benefits also involves following points:
  • It helps an organization in Decision making process
  • Management better be aware of activities of all the staff members in order to complete their appointed tasks.
  • Manager responsibility increases through budgeting for achieving goals of an organization.
  • Budgeting can also be used for measuring and evaluating the performance of employees.

Budgeting Problems and Solutions=

As everyone knows about the benefits of budgeting in order to meet certain expenditures there are also many Problems (like budget deficit etc.) which can be faced due to budgeting however there is not any problem which cannot be solved similarly budgeting problem can be solved via suitable solutions.

Budget Problems=
  • Sometimes it creates Unrealistic goals of an organization.
  • If the management lack communication skills it can destroy the pathway to achieve goals.
  • Proper Budgeting requires financial experts otherwise the budget can be made totally against the goals.


Budget Solutions=
  • The budget must be based on reasonable and achievable policies.
  • In order to solve communication skills between staff members there must be communication training for all the employees and after that employee must participate in budgeting process.
  • Before preparing budget it is necessary to know whether the person who is preparing the budget do have enough knowledge and experience in order to prepare a proper budget for an organization.

Do you know Master budget and Flexible budget?
  


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