Just as a ship that needs to be navigated properly to reach its destination safely, a Company needs a well-planned budget to help achieve its goals.
Budgeting, like any other activity, is subject to the interpretation of each practicing organization. Budgeting is the process of preparation, implementation and operation of budgets decisions into specific projected financial plans for relatively short periods of time. In other words, budgeting is the process of “translating financial resources into human purposes” (Wildavsky, 1986).
Budgeting is also viewed as a process of identifying, gathering, summarising and communicating financial information of an organization’s future activities. Blumentritt (2006) further explained that budgeting processes include a review and study of the prior period’s financial results, projections for sales, operating expenses (fixed, variable, and semi-variable) and financing expenses, examination of proposals for capital expenditures, and means of rolling up and rationalizing figures from different functional departments to ensure they meet company-wide profit expectations.
Budgeting lies at the foundation of every financial plan. It doesn’t matter if you’re living paycheck to paycheck or earning six-figures a year, you need to know where your money is going if you want to have a handle on your finances. Unlike what you might believe, budgeting isn’t all about restricting what you spend money on and cutting out all the fun in your life. It’s really about understanding how much money you have, where it goes, and then planning how to best allocate those funds. Here’s everything you need to help you create and maintain a budget.
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