D1 Unit 5 Benefits

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Recommended: Budget as an effective management tool

while propose profit was £40,000 and actual £26,000. The review of budget and actual provides feedback information for control purpose .
Budget directs managers attention to the future. Let us assume that the reason for sales position is poor market was due to poor market penetration or price offering for the customer, then subsequently the company needs to put more attention to issues raised in the past years and amends will be made for future. A responsible organization while cutting its budget for the new year needs to put to work issues flagged in budget review .
Budget enables management to anticipate problem or opportunities on time and deal with them effectively. Before companies cut its budget , the company is expected to review its environment , its competitors , target market etc . Access Limited with this result will enable it anticipate more problem having analyzed the cause of drop in sales .
Budget serves as motivating factor for the organization. Plan figures for the year can be broken down to half year, quarterly basis, or monthly. For example at end on month actual figure realized compared with monthly budget will give clearer picture and reveal whether the company is in budget of the budget is not doable. One thing that can achieve is it make the company to do more if it is way behind budget
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If the they are not properly planned and manage , then the organization will ceases to exist in short distance time. While it may seem like having a budget limits creativity and growth, the opposite is true knowing what you have on hand to spend can make it easier to push business boundaries, stretch yourself, and grow creatively. Only when you know what you're obligated to spend, what's forecast in the next business quarters, and what revenue you can rely on can you really make informed financial management

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