Traditional Budgeting: Planning, Performance Management, and Control Tool

BUSINESS FINANCE
2019

Traditional budgeting
Executive Summary
Traditional budgeting assumes a place of special importance as it leads to planning, performance
management and control tool. However, with the introduction of other tools namely the
alternative budgetary tools there has been a major shift. The current report stress upon the
organization SnappyDrinks that aims to introduce a new product and hence, is looking for the
best budgetary tool. The report sheds light on traditional, as well as alternative system in the light
of this organization.
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Traditional budgeting
Contents
Introduction.................................................................................................................................................4
i. Purpose of preparing a budget............................................................................................................4
ii. Application of traditional budgeting approaches to planning future cost management for a specific
business.......................................................................................................................................................5
iv. Alternate budgets................................................................................................................................7
v. Application of the methods.................................................................................................................9
vi. Combination of methods...................................................................................................................10
Conclusion.................................................................................................................................................11
References.................................................................................................................................................12
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Traditional budgeting
Introduction
It is very important for the organization to carry out proper budgeting exercises so that they can
complete over the same resources and achieve success. Every department of the organization is
recruited with different services because of which it is important for them to complete the task so
that the goals and strategies of the company can be fulfilled. It is noticed generally that the end
of the process requires everyone to compromise equally so that they can intersect with the
interests of the organizational goals by exercising proper management.
i. Purpose of preparing a budget
It is very important for an organization to maintain a budget for conducting its activities so that it
can specify the directions in which it is supposed to head. This helps to make a basic planning
structure by using which the top level management structure can ensure organizational success.
However, if the budget is not prepared and looked after carefully by the executives then the
organization may be forced to face huge losses. Budget is only useful to an organization if it is
structured properly in accordance with the judgment of employee’s performance and
expectations that are required to be met for completion of the organizational goals and strategies
(Needles & Powers, 2013).
Predict cash flows-it is observed that a budget can be very useful to the companies that are
growing rapidly in the market by improvising their seasonal sales with irregular sales pattern.
The growing companies generally face the problem of depicting the cash flows and estimating
the cash in hand because of which they suffer from periodic cash related crisis. By implementing
a proper budgeting process, the organization can easily predict the cash flows nag thus improve
the revenue by making changes according to the future plans (Leo, 2011). Hence, it can be stated
that the future depicted cash flows will only be profitable if a reasonable budgeting objective
cover set for the next few months.
Allocate resources- adapting observed that some of the organizations try to implement budgeting
process in order to allocate funds to various activities. In order to carry out this process correctly,
a valid objective should be analyzed so that it can be combined with proper constraint analysis
which can be helpful for the determination of the allocation of costs and other resources.
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