Budgeting(2.2.4) Flashcards
What is a budget?
a financial plan that shows hoe much money a business expects to spend over a certain period which helps a business to monitor and control its costs more effectively
The key purposes of budgeting
planning
communication
motivation
control and monitoring
efficiency
coordination
Control and monitoring-budgeting
a budget helps a business to control its expenses more effectively
by comparing actual costs against the budgeted costs a business can identify areas where it is overspending and take corrective action to control costs
Planning-budgeting
a budget helps a business plan for for the future by setting financial goals and objectives for cost reduction
it provides a roadmap for the business to follow outlining the expenses that need to be reduced to achieve those goals
Coordination-budgeting
a budget helps to coordinate cost control efforts across different departments in a business
by setting financial goals and allocating resources the budget ensures that everyone is working towards the same objectives
Communication-budgeting
a budget can be used to communicate financial expectations to stakeholders such as shareholders or lenders
it provides transparency and accountability demonstrating how the business plans to control its costs to improve its financial performance
Efficiency-budgeting
a budget helps a business allocate its financial resources more efficiently by identifying areas where costs can be reduced without affecting the quality of its products or services
Motivation-budgeting
a budget can also be used to motivate employees to work towards cost reduction goals
by setting cost reduction targets and incentivising employees to achieve them the budget can help create a sense of ownership and responsibility among employees which can improve their motivation and job satisfaction
Historical figures budgeting
budgt
