deffinition of budgeting.
Establishing a planned level of expenditures, usually at a fairly detailed level. A company may plan and maintain a budget on a cash basis.
+ They provide direction and coordination, ensures spending is geared towards the aim of the business.
+ motivate staff, encourages responsibility and recognising gain from meeting budgets.
+ improve efficiency of a business.
+ can predict future, forecasting ability.
- Difficult to monitor fairly, they must rely on the honesty of the budget holder.
- Allocations may be incorrect; unforeseen changes may mean the budget is not right.
- saving may not be seen an interest, saving money on other things to keep within a budget can be bad within the long run.
Be consistent with the aims of a business and based upon the options of as many people as possible. Set challenging but realistic targets.
The process of which the outcomes of a budget are examined and compared with predicted figure so that reasons for changes are found.
when costs are lower than expected and revenue is higher than expected.
when costs are higher than expected or revenue is lower than expected.