Essay Sample on Benefits of Budgeting in Business

Budgeting is one of the approaches that any firm can use to ensure there is proper money management. The primary task of budgeting is to estimate available resources in relation to supporting future work in a given firm. The use of budgeting has been on the rise, and the budgeting method varies from one firm to another (Klimaitiene & Ramanauskaite 2019). This article examines the benefits of budgeting and various issues arising in related contexts.

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Budgeting improves control and management of firms. It helps relevant stakeholders to track their resources in terms of consumption and distribution. Stakeholders are also able to curb overspending on resources. Budgeting ensures that finances will be distributed evenly, hence the stakeholders can plan for future development (Klimaitiene & Ramanauskaite 2019).

Budgeting also helps in planning as it is the strategy intended to be used as a pacesetter of the goals to be achieved by a given firm, regardless of it being short-term or long-term. Budgeting triggers the given stakeholders to imagine what is ahead and work smart to lead in the contention. Budgeting is also used by various firms to evaluate outcomes as the given stakeholders will put all the set requirements as per each distribution and further on wait for the outcomes. Additionally, budgeting can be used to survey the performance of a given firm, such as the capabilities of increasing process steps, especially where it is constrained. With this, a firm is likely to determine their next move in their analysis.

A firm's budget should not be violated because this may lead to poor cash flow (Ashe-Edmunds 2020). If a firm's budget is not clear when their income will transpire and when the invoices are expected; a firm is likely to experience poor credit tracking and an inability to price its products usefully. Budgeting is a core process in any given firm's operation as it would enable them to meet their target of performance competently.

In conclusion, budgeting is a crucial requirement for any firm as it ensures there is a plan on how money will be spent, hence creates a good flow of cash. Budgeting will also keep a firm out of debt. Any firm's budget should not be violated since it may lead to poor cash flow (Ashe-Edmunds 2020). Therefore, budgeting is crucial in keeping track on how money is controlled while tracking the spending.

References

Ashe-Edmunds, S. (2020). What Will Happen if an Organization Does Not Properly Budget? Retrived 4 July 2020, from; https://smallbusiness.chron.com/happen-organization-not-properly-budget-70930.html

Klimaitiene, R., & Ramanauskaite, J. (2019). Insight into budgeting practices: empirical study of the largest manufacturing companies in lithuania.  Science and Studies of Accounting and Finance Problems and Perspectives 13(1), 19-27.