Managing Finance with Budget
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1717 Downloads I Published: 06 Feb ,2019
In order to manage the finance of to predict the need of finance in future a budget related to the finance is drafted, so that organization makes an idea about the needs of finance in future or can make proper strategies regarding that.
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Budget is the estimated numerical expression of inflows and outflows of the organization Kepi, 2017). For preparing the current budget company observe the past budgets and on the bases of it new budget is prepared as all the budgets are interlinked. By going through the pattern of budget current budget is prepared. As all the organizations has decided their time to monitor the budget as per their requirement.
After preparing the final budget, management team have to provide a report on that budget to the senior level officers, explaining all the estimation or result they have taken or derived from that budget (Larsen, 2017). As all the proper information regarding the financial condition should be there in the report. As what they have estimated in the budget or budget is giving the positive result or not. In budget we can calculate many variances related to the production, price, sales and overhead. As by calculating these variances we get to know about the favorable or unfavorable results. If variances are unfavorable than it will affect the company growth and if variances are giving favorable results than the company is in progress.
There are two approaches from which an organization can manage its budget by using various approaches like customer research approach or competitor research approach (Jimenez, 2017).As before drafting the budget a proper review will be taken by management team in order to collect all the information. AS team will the operating process production capacity, and analyzing the working efficiency of the employees in order to improve the current condition of the organization.
Main part of the budget is profit and loss account, balance sheet, cash flow statement. Profit and loss account is the account the books of organization in which all income and gains are credited and all losses and expenses are debited, in order to show the profit of loss of the organization for a period of time (Dang, Momtez, Zimmerman and Nhung, 2017). Balance sheet is the statement of assets and liabilities of a business at a particular point of time. Cash flow statement shows the changes in cash balances during a period of time. By all this three statement organization can predict their position in the market or can see that whether organization is developing or not.
As from the above answers it is clear that drafting a budget is important part of the organization. As budget shows the financial position, favorable, unfavorable variances of the organization.
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