It is not at all easy to forecast our future, but in financial terms this can be done by applying Budgeting techniques. Budgeting can be defined as the process of planning and anticipating costs and expenditure of various financial resources on projects. It is the process of making specific financial plans for a short period of time or even for long durations in certain cases. Through budgeting predictions can be made and thus it helps in controlling the money spent within the organization and also involves day to day monitoring of current budgets. The actual position can be compared with the budgeted figures and devitions can be noted and worked upon thereby helping the organization in achieving their goals in cost effective way.
It involves making different budgets including:
- Master Budget: The overall budget of the organization can be rightly said to be the master budget of the business. It comprises of all other budgets. It is very beneficial for the top management as the whole situation of the organization can be easily known by having a glance over the master budget.
- Sales Budget: The budget is made to forecast sales in terms of units sold and value of goods sold. This budget acts as a base for making production budget. If we are aware of our sales position we can easily concentrate on other major fields like marketing those products and the financing requirements needed at regular intervals of time.
- Production Budget: The budget is made on the basis of sales budget and forecasts the number of units to be produced in coming months and how will production schedule be adjusted to meet the sales target. Many other requirements like that of labour, raw material etc are dependent upon the production budget.
- Financial Budget: Finance is said to be the nucleus of any business without which no organization can grow. Finding the exact time when is the money needed is most important necessity. The budget is made to forecast the cash and capital requirements for different projects. Moreover the various sources of finance available are also compared in order to find out the most economical source available with the organization.
Today, companies are outsourcing the budgeting process to professional accounting firms for better planning & allocation of resources. It helps the company to utilize its current resources in the best possible manner as we can help them to get the best deal available.
Outsourcing the Budgeting function can provide the company the following advantages:
- Helps the management set out detailed plans for different departments.
- By outsourcing one of the most important function of organization the management can think upon other functions like that of planning and organization.
- Best services at a very nominal cost and thereby reducing the ultimate cost of the product.
- The best budgeting services can be availed by sitting at your own place.
- Optimum resource allocation and thereby achieving the goals in the most cost effective way.
- Helps the management set different budget targets and thus setting the targets for each department separately.
- Provides a yardstick against which the actual financial and non-financial performance can be measured
- The deviations from the budgets can be easily measured and requisite measures can be taken well on time.
- Better management of scarce resources
- Better time management