Quick Budgeting question

[laineytheman]

I have heard questions like, why is it adviced to do more than 1 budget a year, What are some reasons?

All I have is

-Makes each budget more realistic, as past reporting period information is used, making them more reliable
-If a non current asset is purchased, it will reduce cash flow prompting a new budget which includes the NCA to be made
 

any more? my answers are pathetic lol

[ben4386]

budgeting has three main roles

planning- as in planning for the future

decision making- comparing past performance with budgeted performance, highlighting differences taking corrective action

control- being able to actually implement the plan.


now doing regular budgets makes each of these 3 areas easier to evaluate,

e.g. monthly budget
- allows you to plan which months you will undertake different activities such as the cash purchase of a NCA, or when to put in capital contributions
- allows you to make decisions month by month on possible problems such as a stock loss that was much higher than budgeted
- allows you to implement the plan easier as you have monthly objectives rather than yearly objectives

one of the benefits of also doing regular budgets is the behavioral aspect. When people need to reach budgets and target revenues, expenses and cash flows their tends to be more urgency and efficiency, say a person needs to meet a yearly budget they might slack off during the year but if they need to meet a monthly budget they may continuously work productively.

hope this helps

ben

[darkphoenix]

Earlier detection of problems, so remedial action can be taken.