Budgeting
A budget is a key management tool for planning, monitoring, and controlling the finances of a project or organization. It estimates the income and expenditures for a set period of time for the particular project or organization. The main purpose of budgeting system is used for control. Budget has it own essential features, which includes policies, data, documentation and period. A budget id based on the policies needed to fulfill the objectives of the entity. Data is usually expressed in monetary terms. Documentation is usually written down. Period relates to future period of time. The process of making consistently monitoring the actual result and budgeted result and followed by making needed corrective action. This is known as “budgetary control”. It has seven important features, which are responsibilities, action plan, adherence, monitoring, correction, approval, variances.(John, 2010, p. 326) Some budget allocation maybe short –term, like one year or less, it can be intermediate for tow or three years. By controlling and allocating funds, budgeting becomes an integral part of tactical action plan. Managers and employees should be requested to take place in the budget-setting process. As such, promoting them to better understanding of the tactical action plan and improving acceptance of decisions and commitment to them. There are two techniques of budget : variable budgeting and moving budgeting. Variable budgeting allows for deviations between planned output and actual output by considering the fact that variable costs depend on the level of output, where as fixed cost do not. Moving budgeting creates a tentative budget for a fixed period of time and then revised and updates it on a periodic basis to take changes into account. However, one downside of moving budget is that they needs frequent revisions, requiring employees to spend extra time on the process. To sum up, budgeting is important for the short run.(Luis and David, 2012, p. 170) Moreover,