Assignment

USE OF BUDGETING AS A MANAGEMENT TECHNIQUE FOR MANAGING RESOURCES
ABSTRACT
The focus of this assignment is on explaining the various types of budgeting methods that can be used in the modern business organizations and which will provide the best results for the achievement of organizational goals. This also explains the budgeting process that can be used by different organizations to develop a budget which can be for any future period. The preparation of the budget is an important process for organizations as it provides the management with the entire outlook of the workings of every process involved in the organization for c certain future. This also gives the managers targets that they have to achieve during the period so that the resources can be most appropriately utilized. Over the years the budgeting process has now become redundant and the traditional method has become a process with no innovation in the budgeting process. ‘Beyond budgeting’ is the new concept which has evolved in recent time for the budgeting process.
    Serial Numbe
    Contents
    Page Numbe
    1.
    Introduction
    1
    2.
    Budgeting Process
    2-4
    3.
    Purpose of the Budgeting process
    5-6
    4.
    Practices in preparing budget
    7
    5.
    Relevance of Traditional Budgeting
    8
    6.
    Recommendation
    9
    7.
    Conclusion
    10
    8.
    Referencing
    11-12
INTRODUCTION
Budgeting is the process of allocation of all the resources available with the organization for a period in the future which gives the management a target of the revenue and the expenses for that period. Due to this allocation of resources the entire team knows that how the process is needed to be completed, with using what resources the process should be completed and what revenue has to be generated for that period. The budgeting process creates a budget that will be used as a benchmark for the working of that period in respect of the level of production, the cost that will be incu
ed for achieving that level of production. The budgeting process helps the management with the appropriate utilization of resources and how these resources can be used for the best of the enterprise (Li
y, T. and Lindsay, R.M., 2010). The budgeting process is based on certain assumptions that are to be made at the beginning of the creation of the budget.
Budgeting is used to keep track of the expenditure and the revenues and is used as a controlling method to control the expenses incu
ed and also monitor the expenses and revenue closely so that the actual process in the organization does not deviate and the objectives of the organization can be achieved. The budget also prepares the management for the future threats or dangers that can occur in the future period which due to the preparation of budget the management can assess the risk of those threats and can be prepared for facing those threats or prevent those threats from happening. The budget ensures that the expenditure incu
ed by the organization is in the co
ect direction and that will help achieve the objectives of the company.
BUDGETING PROCESS
The budgeting process is the implementation of a plan so that the business operations are conducted in a predesigned way so that the organizational goals are achieved. Budget can also be thought of as goals that the management wants to achieve in the future period and budget helps the management to devise a plan so that those goals are timely achieved. The budget is used to track the effectiveness of the employees and the managers working in different areas of the company (Snider, D., Apptio Inc, 2013). The budget acts as a plan for the actual operations that define the steps that are to be taken by the managers so that the goals are achieved.
The process of budgeting can be done in the two most used methods which are as follows:
1. TOP-DOWN APPROACH: In this method of budgeting, the top management defines the budget and sets all the goals for individual departments which have to be implemented by the managers at their divisional levels. The involvement of the divisional managers is bare minimum. The divisional managers only need to implement the allocation of the resources as made by the top management team.
2. BOTTOM-UP APPROACH: In this method of budgeting the individual departments prepare the core budget for their department within the guidelines as issued by the top management. The main budget is prepared by the individual heads or managers of each department and these small budgets are clu
ed together to make an overall budget for the entire organization. The benefit of this budget is that it gives the workers in the lower level of hierarchy importance in making a decisional activity which makes the workers and managers responsible for achieving the targets as decided by them.
The preparation of a budget is a process that has to be conducted by the entire team of the managers so that the organization can achieve its goals and ensures that every aspect of the organization is covered. The preparation of the budget by any method has to go through the same process. The budgeting process takes care of the operational activity of the business as well as the ancillary activities which are important for the business enterprise to run. The process of budgeting is defined below:
1. REALISTIC ASSUMPTIONS: A budget can only be applicable if the assumptions on which the budget will be based on have to be practically possible. For example, if a manufacturing unit has a production capacity of producing 100000 units of a particular product but while preparation of the budget the sales cannot be assumed for more than 100000 units as the organization will not be able to produce more than the maximum capacity of machines. Therefore the assumptions should be practically possible to achieve by...