Accounting

INTRODUCTION

Budgeting is a process of creating a plan to spend your money and it is an estimation of the cash inflows and outflows for a business over a period of time. It is an important component of financial success and to ensure that companies are spending less than their operating capital and plan for short- and long-term. It helps to access whether the business is making full use of its money to fulfil regular operations and whether money is being left in unproductive capacities. It is also a proactive approach to manage their money that can go a long way towards reaching their goals.

Communication is an important element of the budget process. A company meeting to communicate the process is to ensure everyone receives the same message, and are designed to discuss a budget's current standing and what changes to be made to increase profit and revenue. It involves communicating the roles and responsibilities so people can work together to reach a conclusion. The effectiveness of communication within the budgeting process is dependent upon the effectiveness of communication within the organization.

ADVANTAGES

A budget helps to identify the standard for cash flow within the business. Forecasting helps companies to project annual expenses yet it also lets you see costs as they will occur. Money is easy to spent off and lose its sight therefore a properly structured budgeting helps business to produce money and knowing how much to use.

Budgetary control will show an overall improvement in the working efficiency of an organisation. Budgeting the actual amount to pay premiums in upcoming months they come due helps to manage companies' cash flow to ensure themselves that they have money on hand to pay bills each month. Budgeting helps the management to put down in figures what is necessary for a satisfactory performance and also forces the management to consider expected the future market trends.

By having a good plan in place, the management can easily notice in...