Tuesday 1 January 2019

What is budgeting? – Functions – benefits and types

The budget is a document that seeks to reconcile priority-the priority of the program with the resources project revenues. The budget incorporates an announcement from the Organization's activities or purposes for a period of time. It is determine by the information on the funds need for the event or to accomplish those goals.

The budget is a work plan which is express quantitatively measure in units of the standard monetary unit of measure and the other covers a period of one year.

Budgeting is a financial planning company that is use as the basis for controlling (surveillance) financial company for the period to come.

The budget is a short-term plan drawn up on the basis of a long term plan of activities has been establish in the process of drafting the program. Where the budget prepare by management for a period of one year, which would later take the company to the desire specific conditions with the specify resource.


"Profit planning and control may be broadly defining systematic approach for accomplishing this and the planning, coordinating and control responsibility of management".

From an understanding of the above, the budget associate with the basic functions of management that includes the functions of planning, coordination and supervision. So when the budget is link the basic functions of management then the budget includes the function of planning, directing, organizing and supervising each unit and organizational fields in the business entity.

Budget Function:

The role of the budget in a company is a tool to help management in execution, the function of planning, coordination, supervision and also work as a guide in run the company for its intend purpose.

The Fungi Planning

Planning is one of the management function and this function is one of the management function and this function is the basis of the implementation of other management functions.

Gives understanding about planning as follows:

"planning actions include selecting and connecting facts and making and using assumptions about the future in terms of visualize as well as formulating the propose activities which are deem necessary to achieve the desire basil ".

From the excerpt above conclude that before the company commence operation, the Chairman of the company must first formulate what activities will be implement in the future and results that will be achieve from These activities, as well as how to implement them. The existence of such a plan, then the activity will be carry out properly.

The Surveillance Function

budget is one way to hold oversight within the company. Supervision it is efforts taken in order for the plans that have been drawn up before can be achieve. Thus supervision is to evaluate the work and achievements of the corrective actions when necessary. Aspects of the supervision is to compare between the accomplishment with a budget, if efficiency can be found or whether the implementing managers have work well in managing the company. The purpose of the supervision it is not find fault but to prevent and fix errors. It often happens that the oversight function is subject to interpret that is looking for someone else's fault or as a means of punishment for dropping a mistake made on purpose that surveillance to ensure the achievement of business objectives and corporate plan.

Coordination of Functions

the functions of the coordination action alignment demands work from any individual or company in part to achieve a goal. Thus it can be said that the existence of the necessary coordination to create good planning. Which can indicate an alignment plan between one part with another part. The budget serves as the planning should be able to adjust the plans made for the various sections within the company. So that the plan of activities that one would be in tune with each other. For that the budget can be use as an instrument of coordination for all parts. That are in the company, because all the interrelated activities between one section with another section is set up properly.

Employment Guidelines as a Budget

a budget is a plan of work drawn up systematically and express in monetary units. Often the preparation of a budget base on past experience and the appraiser estimates in the future, then this can be a guideline for the work of each section within the company to run its activities.
The most important Purpose of a budget is to outside scrutiny, i.e., to limit the overall resources available to an agency and to prevent spending-spending for things or activities that are not allow by law.

The benefits budget:

  1. The budget is the result of the planning process, meaning the budget represents. The deal negotiate between the dominant participants in an organization about the purpose of the activity in the future.

  2. The budget is the description of the priority allocation of resources own. Because it can act as a blue print of company activity.

  3. Budget is the internal communication tool that connects the Department (Division). The one with other departments (divisions) within the Organization as well as with the management of the Summit.

  4. The budget provides information about the results of the activities of the real compare. To the standard that has been set.

  5. The budget as a means of controlling that lead management to determine the part of the Organization's strong and weak. This would be direct management to determine the correction actions should be taken.

  6. Budget influence and motivate managers and employees to work with consistent, effective and efficient in the condition of suitability of purpose between company goals with the goals of employees.

Types of budgets

A Ceiling Of Budget

The type of budget that is use for the purposes of supervision call Ceiling Budget. This type of budget overseeing an agency directly with how to determine spending limits through. The use of regulations/granting, or indirectly by way of limiting. The revenue agencies on a known source and the amount of limit.

A Line-Item Budget

This type is classify by type of expenditure-expenditure, use to supervise. The types of expenditures and also the amount of total.

Performance and Program Budgets

This type is useful for specifying activities or programs based on where the funds are use. In this way helps in his. By means of separate expenditure-expenditure by function. Such as public health or safety or by type of expenditure. Such as staffing and equipment or base on source of income as tax wealth or usage fees. The administrator and the members of the legislature can get proper reports on financial transactions. To maintain good efficiency into or scrutiny from outside.

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