Budget and Importance of Budget Process : Assignment
Added on 2020-10-05
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COURSE WORK
Table of ContentINTRODUCTION...........................................................................................................................1PART 1............................................................................................................................................1Purpose of preparing budget and importance of budget process.................................................1Application of traditional budgeting............................................................................................2Appropriation of traditional budgetary system............................................................................3PART 2............................................................................................................................................4Analysis of alternative Budget Methods......................................................................................4Application of alternative methods..............................................................................................5Methods that are appropriate for company..................................................................................6CONCLUSION................................................................................................................................7REFERENCES................................................................................................................................8
INTRODUCTIONBudget is a future financial plan of income and expenses of company and it is preparedby financial manager for a specific period. This report includes purpose of preparing budget.Further, this report explains importance of processes of making financial plan. Furthermore, thisreport elaborate application of approaches of traditional budgeting which is important in futurecost management. Moreover, this report analyse appropriateness of traditional budgeting systemfor SnappyDrinks. Further, this report explains various types of budget methods. Furthermore,this report includes advantage & disadvantage of each alternative method. Moreover, this reportelaborate application of alternative methods in company. At last, this report explains whichmethod is most appropriate for SnappyDrinks. PART 1Purpose of preparing budget and importance of budget processPurposeBudget is a financial plan which is prepared with a motive of meeting objectives oforganisation. SnappyDrinks prepare its budget of income and expenses and purpose behind thisis discussed below-Estimation of Income & Expenditure- It is the most important purpose behindpreparation of budget as it includes description of future expenses and income which helpscompany in achieving profits. Budget is prepared by SnappyDrinks for analysing financialstability and efficiency of its performance(Reynolds, 2016).Making Operational Decisions- Budget is also prepared for making financial decisionsin which cost can be minimised and that further leads to higher performance & profitability.Monitoring Performance of Business- SnappyDrinks prepare its budget for monitoringand controlling its business performance. So, that it can provide quality products which helps inprofit maximisation.Allocation of Resources- It is the most important purpose behind budget preparationbecause, with this SnappyDrinks can do efficient use of its resources. It is also prepared with apurpose of allocation of new funds and allocation of resources in accordance with change inpolicy.Deciding Incentives- Budget is also prepared by SnappyDrinks with a purpose ofidentifying incentives and it is also prepared for maintaining liquidity in firm.1
Process of Budget Budget process includes various steps which helps SnappyDrinks in preparing aneffective budget, This process are discussed below-Identifying Goals- SnappyDrinks 1st identify its goals & objectives and evaluate currentfinancial performance of company. Because, it is important in making an effective budget. ForExample- In future company wants to introduce new products and services than upcomingbudget of firm is one which helps in expansion and gives profitability. Identification of goals andobjectives also contributes in development of business(Le Quéré, Arneth and Boden, 2015).Forecasting Future Expectation- After identifying goals for which budget is need to beprepared a future forecast is to be done by financial manager of SnappyDrinks. Forecasting isdone on the basis of past performance of company. This forecasting helps company in preparingan effective budget which gives positive results which further helps in development of businessmodel of firm.Preparation & Implementation of Budget- After forecasting future expectation budgetis prepared which includes detailed information of companies income & expenditure for futureperiod with a purpose of achieving set goals. Prepared budget is than put into business operationsof SnappyDrinks. This process is important as it helps in implementation of budget in compaiesoperations.Monitoring & Controlling- After implementation of budget it is to be monitored byfinancial mangers of SnappyDrinks as it is in accordance with objectives of company or not. Andif prepared budget is not giving effective results than changes is made in budget accordingly.Thus, monitoring & controlling process helps company in adjusting its budget according tochanges made in operations which enhances performance of business.Redefining Goals- In this process company redefine its goals & objectives which helpscompany in expanding its business. Thus, all these processes included in preparation of budgethelps SnappyDrinks in improvement of their business model. Redefining goals is important as ithelps company in its overall improvement.Application of traditional budgetingTraditional Budgeting approach such as better budgeting approach & beyond budgetingapproach helps SnappyDrinks in maintaining financial stability of company. If company applythis approach in its operation than it reduces future cost of manufacturing. By applying this2
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