Exploring Budgeting, Finance Functions, and Stakeholder Statement Use

This report provides an overview of financial management, focusing on the role of budgeting in planning, control, and decision-making. It defines different types of budgets, including balanced, surplus, and deficit budgets, and explains how they are used to effectively manage resources. The report also explores the finance function within an organization and its relationship with other key departments such as marketing, production, and human resources, highlighting the importance of financial resources for overall business success. Finally, it discusses how various stakeholders, including owners, managers, investors, lenders, customers, and government agencies, utilize financial statements to assess the financial health and compliance of an enterprise. The report concludes that effective budgeting and financial management are crucial for achieving organizational goals and maintaining financial stability.

Introduction to Financial
Management

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1.Define budget and how it is used in planning, control and decision making...........................1
2.Discuss the finance function and its relationship with three other functions within the
organisation such as Marketing, Production and Human Resources...........................................2
3.Discuss the utilisation of financial statements by relevant stakeholders such as owner,
manager or external users............................................................................................................3
CONCLUSION ...............................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Financial management refers to the function of the business which is concerned with
profitability, expenses, cash and credit for the purpose that the business has the necessary means
and resources to continue its objectives in a satisfactory manner (Ramana and Muduli, 2019). In
this report, the concept of financial management has been taken as a base and the budgetary
aspect of the same is explained in the report below. The concept of budget and the three types of
budgets have been explained below in the report. It also gives an overview of the finance
functions and its relationship with other areas such as marketings, human resource. The report
lastly contains the various type of users of financial statements of an enterprise and how they
utilise the informations achieved through these statements for benefit.
MAIN BODY
1.Define budget and how it is used in planning, control and decision making.
A budget is an approximate estimate of the business revenues and expenses for a specific
time period in future which is then used by various business stakeholders, governments and
individuals. It is primarily a type of a detailed financial plan for a specified time period which
enhances the financial futuristic planning of the enterprise by acquisition and utilisation of
financial resources. Budgets can be prepared for an individual, an enterprise, an entire nation or
for any such practice which involves spending and making money. There are three types of
budgets which are prepared by the business organisations which are as follows:
1. Balanced budgets: This is the type of budget in which the approximated spending of the
business matches with or is equal to the approximated receipts in a financial year. A
balanced budget is the one which can be termed as an ideal budget as it defines spendings
within the revenue earning capacity (Andreeva and et.al., 2018). It ensures stability in the
business and keeps the expenditures in check.
2. Surplus budget: It is the type of budget in which the revenues estimated by the business
generally surpasses the approximated expenditure in a particular financial year. So the
earnings and the generated revenues are higher than the expenses that the business has
done on several projects. The extra revenues assist the business to pay for all its due debts
and outstanding dues in the year.
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3. Deficit budgets: It is a type of budget where the estimated expenditure is higher than the
revenues that the business estimated to achieve in the particular financial year. This
results in more borrowings and debt in the business. The deficit budget leads to more
borrowings and debts in the business due to high expenditures and lower revenues
(Bialowolski, Cwynar and Weziak-Bialowolska, 2020).
Budgets are utilised for planning, control and decision making processes so as to assist
the business in effectively utilising its resources and available opportunities. The budgets help
the business to plan their future operations in terms of targetted revenues, sales figures, expected
expenditures and an efficient profit margin for the business. All these aspects essential in
planning could be successfully implemented if the business has a budget prepared with
established goals and objectives so that it can serve as a standard for the business in planning
evaluating its performance and areas to make financial expenditures and revenues. The budgets
also help an organisation in effective control as it helps the business in coordinating all its
activities and operations by effective integration of plans of several departments together and
ensure that the organisation is moving forward with all departments in the same direction.
Budgets also help in decision making as with the help of already established standards the
business can make effective decisions relating to resource allocations, expenditure control, risk
apportionment and distribution of profits (Arnold and Lewis, 2019).
2.Discuss the finance function and its relationship with three other functions within the
organisation such as Marketing, Production and Human Resources.
Finance function in an organisation refers to the practices and actions which are directed
towards the managing, assisting and dealing with the business finances. These functions are
primarily focussed on acquiring and managing the financial resources for the objective of profit
generation. The financial resources and informations which are acquired through the functions of
finance make effective contributions towards the productivity of several other functions such as
decision making, planning and others. The finance functions are a necessity for business
organisations as it deals with the most basic resources needed for business, financial resources.
Without this the businesses can not survive through other functions as they are all related hence
without financing functions, a business may not exist (Simpson, Tetteh and Agyenim-Boateng,
2020).
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Financing as a function is attached to several other business functions in various ways.
Some of the functions are mentioned below:
Production: Finance functions assist the functions relating to production as in the expectation of
demands. This is an essential function in the business organisation. Hence effective financing
through the finance functions helps to plan upon the productions and material requirements in the
business so as to achieve and utilise the productions effectively. The business does not waits till
the actual sales and orders for acquisition of materials for production (Cuadrado-Ballesteros,
Santis and Bisogno, 2022). Hence the production commences well in advance which is majorly
affected by the finance functions for effective completion.
Marketing: The finance function is related to the monetary aspects in an enterprise like profits,
costs, project feasibility whereas the marketing department is concerned with marketing of the
business products and services in the markets through product development, distribution
channels, promotions and much more. The two are related as without effective execution of
finance functions the business will fail to generate enough profits or high costs which will have a
negative impact on the marketing functions in an organisation . The marketing will suffer due to
high costs or poor financial performance hence strong financial assistance are essential for
marketing (Finkler, Calabrese and Smith, 2022).
Human resource management: the finance functions help to allocate the resources to assist the
business organisation in achievement of organisational as well as individual employee goals,
maintain a strong balance between costs and revenues of business. The HR hires, recruits and
motivates strong individuals to be a part of the organisation and aim to achieve the business
goals. All these processes contribute together for the maximum expense in the business. Hence
the finance function assist to manage and analyse the expense related to the human resource
hiring and ensure maximum utilisation of equipped resources.
3.Discuss the utilisation of financial statements by relevant stakeholders such as owner, manager
or external users.
The financial statements are utilised by various interested users in several ways to assist
their respective needs and requirements. The interested stakeholders of the financial statements
include both the external as well as internal users of the financials of an enterprise (Yao, 2019).
 The internal users includes the business owners, employees and the management.
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 The external users of the business financials includes the potential investors, lenders,
customers and the government (Mayo, 2018).
The investors of the business provide the business with the required capital needs are hence
concerned about the risks, returns and financial performance of the business which is assisted
through their investments. The internal users such as the management, employees utilise the
information from financial statements to perform decision making. The lenders of the business
are interested to use the financials to assess and evaluate the credit worthiness of the business.
The customers utilise the information from these statements in case they are involved with the
enterprise and are dependent on it in one or the other form. The governments and related
agencies utilise the financials to determine and ascertain the compliance adherence of the
enterprise (Okanazu, 2018).
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CONCLUSION
From the above report, it can be concluded that budgets and preparation of budgets is an
essential part of financial management as budgets help an organisation immensely for the
purpose of planning, controlling, decision making and effective handling of all the finances and
monetary resources in the enterprise. The report draws a conclusion upon the financial functions
and the way they assist the other departments in an enterprise such as marketing, productions and
human resource. It concludes the various users, internal as well as external of the financial
statements who utilise these statements for evaluating and assessing the financial position of the
business and several other uses.
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REFERENCES
Books and Journals:
Andreeva, L. Y., and et.al., 2018. Competency-based management in a system of sustainable
development of banks, financial and technology companies. In Contemporary Issues in
Business and Financial Management in Eastern Europe. Emerald Publishing Limited.
Arnold, G. and Lewis, D. S., 2019. Corporate financial management. Pearson UK.
Bialowolski, P., Cwynar, A. and Weziak-Bialowolska, D., 2020. Financial management, division
of financial management power and financial literacy in the family context–evidence
from relationship partner dyads. International Journal of Bank Marketing.
Cuadrado-Ballesteros, B., Santis, S. and Bisogno, M., 2022. Public-sector financial management
and E-government: The role played by accounting systems. International Journal of
Public Administration, 45(8), pp.605-619.
Finkler, S. A., Calabrese, T.D. and Smith, D.L., 2022. Financial management for public, health,
and not-for-profit organizations. CQ Press.
Mayo, H. B., 2018. Basic finance: an introduction to financial institutions, investments, and
management. Cengage Learning.
Okanazu, O. O., 2018. Financial management decision practices for ensuring business solvency
by small and medium scale enterprises. Acta Oeconomica Universitatis Selye, 7(2),
pp.109-121.
Ramana, D. V. and Muduli, S., 2019. Measuring Financial Capability of the Street
Vendors. Available at SSRN 3433606.
Simpson, S. N. Y., Tetteh, L. A. and Agyenim-Boateng, C., 2020. Exploring the socio-cultural
factors in the implementation of public financial management information system in
Ghana. Journal of Accounting & Organizational Change.
Yao, L., 2019. Financial accounting intelligence management of internet of things enterprises
based on data mining algorithm. Journal of Intelligent & Fuzzy Systems, 37(5),
pp.5915-5923.
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