Advantages Of Budgeting

A budget can be defined as a detailed summary of expected or likely income and expenses for a given period. Budgeting actually helps you to know if you can pay for an expense or income will be generated from a business venture. A budget is normally created using a spreadsheet and it offers a tangible, well organized and easily makes you understand the itemization of how much funds you can generate and how much fund you can push into the business. Budgeting is definitely a vital tool to assist you to prioritize your spending and manage funds regardless of how much funds an individual or company has. When one plans or monitor a budget you will be able to know wasteful expenditure, adjust as and when your financial situation changes and attain

Past performance generally refers to how the organization performed in terms of their finances in the past. Budgeted performance allows inefficiencies contained within the past outcomes be identified and excluded in budgeting. It is also know that future situations will be difference from the past and all these are also considered in the budget. This brings the assertion that budgeted performance is a better criterion than past performance.
Budgeting has helped mangers and organization in several ways and one cannot turn to list all advantages or benefits of budgeting. Below are major benefits of budgeting. Budgeting compels planning because all business activities necessitate that one plans to ensure effective and full use of resources.
Budgeting also improves coordination of an organizations day to day activity. Coordination provides the basis for individuals in all departments of an organization to exchange ideas on how to achieve their set goals and objectives. This brings the need of coordination between production team or service team and sales or marking

Therefore if managers see budgeting as an unnecessary burden then there will be a lot of shot falls which cannot be accounted for. Budgeting should hold a very important position in the day to day activity of an organization but should not consume all the time that could be used to monitor other controls. Budgeting is therefore a necessary burden that adds value to the organization.
Sales forecasting is the process by which an organization envisages its future sales. When this is done accurately, it enables the organization to make well informed decisions. Sales forecast is a very important tool as the starting point of a budget because , it helps the firm to decide whether to continue producing the product or know a product that the sales might have gone down or introduction of a new product or ones that requires modification.
It also assists the organization to know its true position on the market as sales forecast is the backbone of marketing. It also assist a firm not to only know the numbers regarding sales but also important clues regarding customer needs, taste and preference. With all these information one can comfortably prepare a budget and know if there would be a positive outcome or