What is a budget?

							**BUK**HB**

A budget is a plan of action to meet a target, in which values expressed in financial terms must
be satisfied within a certain period and under certain conditions. The budget is the annual
development tool for companies or institutions whose plans and programs are formulated
annually.

Developing a budget allows companies to set priorities and assess achievement of its
objectives. To accomplish the targets, you may incur a deficit (operational expenses exceeding
income) or conversely, it may be possible to save in which case the budget will be in surplus
(revenues exceed expenses).

The budget can be considered to be a classic part of the management cycle which entails
planning, acting and controlling (or, more specifically, as part of a total management system.

The main function of the budget relates to the financial control of the organization. Budgetary
control is the process of discovering what is being done by comparing the results with budgeted
data corresponding to verify the achievements or remedy the differences. Estimates may play
both preventive and corrective roles within the organization.

The sales forecast provides the costs to develop budgets: production, marketing and
administrative expenditure. The sales forecast begins with the preparation of sales estimates
which are forwarded to each unit manager.

Budgets are useful in most organizations including utilitarian (business companies),
non-utilitarian (government agencies), large (multinational conglomerates) and small
businesses.

    - They are important because they help minimize the risk in the operations of the
organization.
    - Through the budget plan the company manages its operations effectively.
    - They serve as a mechanism for review of policies and operational strategies.
    - Quantifies in financial terms the various components of your overall plan of action.
    - Budget items serve as guides for the implementation of personnel programs in a given
period, and also function as a standard for comparison once you have completed plans and
programs.

     - Procedures induce advisory specialists to think about the companies' total needs, and to
engage in planning so that they can be assigned to various components.
     - Budgets serve as a means of communication between units at some level and vertically
between executives from one level to another. A network of budget estimates are filtered up
through successive levels for further analysis.
     - The gaps, duplication or positions can be detected and addressed during the development
of the budget.

The budget is an important tool as a standard, used as a means of determining appropriate
administrative capital and revenue costs required in an organization. Leading to the proper use
of available resources according to the needs of each of the units and / or departments.

This tool also helps to determine goals that are comparable over time, and coordinating the
activities of the departments to achieve these, while avoiding unnecessary costs and poor use
of resources. And similarly allows management to know the development of the company,
through comparison of the actual facts and figures.