What is budgeting? Budgeting is one of the important skills that you should have. In any economic forecast, planning and budgeting are crucial when it comes to conserving and developing your resources. The use of a budget can be helpful to not only individuals and families, but companies as well. In order to stay afloat, every company from the small business to the large corporation must keep track of their finances in order to succeed. Often they utilize the services of an accounting professional to keep this information in order. However if you are the owner of a small business or simply trying to deal with your home finances, you may not have the luxury of hiring a professional and need to do the work on your own.
A budget is a financial document used to project future income and expenses
provide a forecast of revenues and expenditures, that is, construct a model of how our business might perform financially if certain strategies, events and plans are carried out.
Business budgeting is one of the most powerful financial tools available to any small-business owner. Put simply, maintaining a good short- and long-range financial plan enables you to control your cash flow instead of having it control you.
Budgeting is simply balancing your expenses with your income. If they don't balance and you spend more than you make, you will have a problem. Many people don't realize that they spend more than they earn and slowly sink deeper into debt every year.
Budgeting is the process of creating a plan to spend your money. Creating this spending plan allows you to determine in advance whether you will have enough money to do the things you need to do or would like to do. If you don't have enough money to do everything you would like to do, then you can use this planning process to prioritize your spending and focus your money on the things that are most important to you.
Budgeting in a business sense is the planned allocation of available funds to each department within a company. Budgeting allows executives to control overspending in less productive areas and put more company assets into areas which generate significant income or good public relations. Budgeting is usually handled during meetings with accountants, financial experts and representatives from each department affected by the budgeting.
Budgeting is a process. This means budgeting is a number of activities performed in order to prepare a budget. A budget is a quantitative plan used as a tool for deciding which activities will be chosen for a future time period.
In a business, the budgeting for operations will include the following:
- preparing estimates of future sales
- preparing estimates of future cash collections and disbursements
- preparing estimates of the future day-to-day activities of the organization
- summarizing these estimates into an income statement and balance sheet
The budgeted income statement and balance sheet are also known as pro-forma financial statements. Once prepared and approved, the budgeted income statement and balance sheet are used to control the future activities of the business.
Here are great reasons to build your Budget:
Stop living from paycheck to paycheck
Figure out how to get out of debt
Once you’re out, stay out of debt!
Get a grip on your spending
Curb impulse purchases
Find ways to cut costs
Build an Emergency Cash Fund
Set and prioritize financial goals
Start a Savings Program
Be a smarter consumer
Retire Early
Learn to live within your means
Live on less money, so you can work less
Pay your bills on time
Meet your families changing financial needs
Reduce stress associated with saving for big expenses
Distinguish between wants and needs
Stop making ends meet with a Credit Card
Learn how to keep some “Mad Money” to spend
Sleep at night without worrying about your bills
Why is Budgeting so Important?
Since budgeting allows you to create a spending plan for your money, it ensures that you will always have enough money for the things you need and the things that are important to you. Following a budget or spending plan will also keep you out of debt or help you work your way out of debt if you are currently in debt.
Enable the actual financial operation of the business to be measured against the forecast.
Why do we produce budgets?
Budget helps to aid the planning of actual operations by forcing managers to consider how the conditions might change and what steps should be taken now and by encouraging managers to consider problems before they arise. It also helps co-ordinate the activities of the organization by compelling managers to examine relationships between their own operation and those of other departments
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