All large companies believed in budgeting. It is a busy affair for companies every year. No matter how good or accurate a budget is, it will not benefit a company if the employees do not support it.
Some experts defined budget as formal business plan. It is a financial target that what a company aims to achieve in the near future. It consists of series of plans and actions expressed in financial numbers and terms. A company can measure its successes and performances during the financial period easily by comparing the results with the budgets.
The process of preparing budgets can bring various benefits to a company. Some of the benefits than can derived from it are:
1. All managers involved will be made to think ahead and plan their targets and how to achieve them.
2. Top management will be compelled to review previous performances identify weaknesses. New action plans are also drawn up to remedy the weaknesses and identify new opportunities for further growth.
3. All departments are required to coordinate their efforts during the preparation phrase. This will enhance teamwork and further improve organization skills.
In order to ensure that a company enjoy the full benefits of budgeting, the top management must support it fully. Most of the lower level employees are influenced by the attitude of the top management. If they see that the top management is committed, they will automatically follows.
Once you have the support of the top management and other employees, your job of preparing budgets would be easier and half done.
Once the budget is completed, it does not mean that the company will automatically achieve its targets when the financial period ends. The budget is only the first step. The company has to ensure that all actions plans in the budgets are followed closely and all interim targets are achieved.