Importance Of Budgeting In A Company

Importance of budgeting in a company

At present, there are concerns in organizations when looking for methods to obtain profits, starting from the fact that every organization is created in order to obtain income, said many entrepreneurs do not get to win everything they want, so they throw theguilt, governments, economy, globalization.

Increasing profits is a great dilemma, since the minds of entrepreneurs or managers are clouded and in this way they are difficult to seek a possible solution to meet the proposed objectives. For this reason, many companies stagnate and have no growth.

When a company wishes to grow, it must increase its activities which generates costs to achieve its mission. And when talking about these costs it is necessary to make a projection in time to identify income and assumptions, in order to anticipate future events and make decisions as necessary, this activity is carried out in an analytical way called Budgets.

The main elements of a budget are:

• It is a plan: that is to say the budget expresses what the administration tries to do, so that the organization achieves a positive change in a certain period of time.
• Integrator: shows that all areas and activities are taken into account. That is, each element in the end forms a whole, but is also directed to each area, so that in the end it manages to contribute to the final objective of the organization.
• Coordinator: It means that individual plans for each area must be prepared together and with tranquility.

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  If this is not met in the end the objectives of the organization will not be expected.

• In financial terms: it refers to the importance of the budget in monetary terms to be the communication element.
• OPERATIONS: A primary objective of a budget is to identify the monetary resources that are intended to be obtained, as well as the costs that will occur. This information must always be prepared in a very detailed way to be clear what decisions to make.
• Resources: Organizations must plan the resources that will be used in carrying out operations, for which the budget must be effective and flexible to changes, to take corrective measures to inconveniences.
• Within a certain time: a budget must be prepared according to a certain period of time.

Importance of budgets

It is a modern tool for the planning and control of the activities that express the behavior of economic indicators such as fluctuations in inflation and devaluation rates and interest rates, which allows the entity to stay in the market being competitive, since it helpsdecrease uncertainty in acquired risks and therefore gives greater accuracy in the final results of the business.  In this way, it meets an important role in administrative, accounting and financial aspects. The implementation of an effective budget system today constitutes one of the keys to the success of a company. From a financial vision, if there is no duly coordinated budget system, the Administration will have only a very vague idea of where to go or where the organization is directed. The importance lies precisely to have a budget system as a management instrument to obtain a more productive use of resources. 

Budgets help determine what are the strong and weak areas of the company. Budget control generates internal efforts coordination. Planning and controlling operations constitute the essence of the planning of profits and the budget system provides an integral table of operations as a whole. When making comparisons between the real operating results with the projected results, the reasons why the desired profits goals were not achieved.

Conclusions

Budgets allow us:

• Determine if the resources will be available to execute the activities and the achievement of the same is attempted.
• Choose those decisions that provide greater benefits to the entity.
• Give a basis for decision making and fixation of policies to follow, which can be rethink if after evaluating them they are not suitable for achieving the proposed objectives.
• Help proper planning of production costs.
• Try to optimize results through proper management of resources.
• Optimize resources.
• Facilitate the effective surveillance of each of the functions and activities of the company.
• Warn about exaggerated or unrealizable optimism, which could bring negative consequences.
• Conduct the work force more productively.
• Based on the measurement, it makes the evaluation of what is done against the budgeted, through analysis, review, and interpretation, for the formation of a trial, as well as proceeding to the leading, which will serve in future decisions, efficiency, efficiency andOf course in an optimal cost.