Pros and Cons of Budgeting - Example

Budgeting regularly receives much criticism To manage your money in the better way, a budget may be used. It is an assessment of your income and disbursals over a period of time. By making and using a monthly budget, you can get a good idea that where you have to spend your money and how much spend. It will aid you to save more money so you may reach your fiscal. Income and expenses are the two categories of budget example. Income includes the money which is earned and also includes the wages whereas expenses include those items on which you spend your money such as food, rent, houses etc( Jonathan Bradbury). The summary of company’s plan is the master budget that adjusts specific targets and goals for their sales, productions, distribution and also the financing activities. In short, a master budget represents broad expressions of management’s plan and also how these plans are gong to be fulfilled. Before the starting of any other budget, presence of one budget is essential. Budget process is the process by which Governments produce and sanction a budget. The worksheets are being prepared by the Financial Service Department to abet the Department Head in formulation of department budgets assessments. Meeting of managers is being held by the Administrator to deliver and discuss plans for the following year’s projected level of activity. The manager can either work alone or with the Financial Services in order to prepare assessments for the departments coming year. The approval of the completed budgets is done by the Executive Officers which are presented to them by their managers. In most cases, exchange of views occurs between the manager and administrative officers as it is the requirement of budget. In the preparation of the budget, the first step is the determination of the principal budget factor which is also known as the key budget factor or bounding budget factor. It is that factor which will bound the activities of an undertaking which will bounds the output (Asantewa, D’Lle, 2003). A. Sales budget affects the naturalistic sales forecast. Sales force opinions, market research, statistical methods and mathematical models are some methods of the sales forecasting. B.The budget which is expressed in accentual terms only is known as Production budget. Analysis of plant utilization and work-in-progress budgets are included in the duties of the production manager. Clamour budget is accentual as well as financial. Ducat budget is a cash plan for a definite period of time. Hence it highlights monthly excesses and budget deficits of actual cash (Mellisa Bushman). The significant features of good budget involve: Participation of as many people as possible in making up a budget. Analysis of the costs and revenues can be done on the basis of product lines, departments or costs centres. Budget centres, Budget committee, Budget officer and Budget manual are involved in organizing and administrating a budget system. PROS AND CONS OF BUDGETING: Obligates managements to think about the future which is likely the most important factor of a budgetary planning and control system. To set out the detailed plans for achieving the targets for each departments to encounter and give the organisation purpose in the right path. Also promotes regulations and communicating skills. It provides the basis for performance of the variance analysis. A budget is basically a criterion.Against which real performance is measured and assess. The control is provided by the equivalence of actual results against budget plans. Differences from the budget can then be investigated and the causes for the differences can be divided into controllable and non-controllable factors: A. It enables alterative action to be taken as variances emerge. B. It also encourages employees by taking part in the setting of budgets. C.It also improves the allocation of barely resources. D.It conserves management time by using the management by exclusion principle. In spite that budgets have many advantages it also have a number of disadvantages particularly they are: Budgets enforced by management can be seen as pressure devices which resulting in bad labour relations and inexact record-keeping. Departmental dispute arises due to conflicts over resource allotment. Departments charging each other if their aims are not accomplished. It is hard to accommodate personal and collective goals (Gattermann G). The pros and cons of cash -only budget: Cash makes you more witting of your expenses. Paying with cash in spite of any kind of card you used, makes you aware that how much amount of money is spending at the moment from your hand. By the use of cash you can’t be spend your money more or over expenses can’t be done, because once money gone so it has gone (Marily, 2006). You refrain credit card fees, with cash. A lot of people spend more or over spend by the usage of the credit cards because they have to then pay in afterwards with the credit cards as in the case of cash money has to be gone from their hand so they spend the money according to their allocated balances or in other words you can say that you can’t do over spend along with the cash. If you use cash instead of credit cards so you will be thinner. This is not totally accurate but recent research showed that people using cards instead of cash have ordered large orders, ascent the size of drink and fries and they often eat more because no money is going to leave directly from their hands. Cash doesn’t provide the protection or it has not the ability to trap the things as the credit cards do. If you pay for some thing e.g., for your foods, clothes etc, and never get it, but as far concern with the credit cards you may get your money back. So, we van ay that with the cash you are the out of luck. Cash can be lost easily, but as you lost your wallet and credit card so you simply cancel your credit card so no one can else use that money. But on the other hand, if you lose your wallet full of money so this money can’t be given back to you. If you find hard in using the credit card and also in spending so cash might be for you. If you are not careful in the expenditure of your cash then you will find difficulty at the end of the month for utility bills, grocery and other necessities of your life. It will cause really a difficult condition to mange at the end of the month due to the shortage of the money. Now, it is your personal choice to either use cash or credit cards(Trent, 2008). The pros and cons of budget airlines: Now-a-days, besides traditional airlines, budget airlines are also introduced in the market which has a satisfactory service and greater savings. Traditional airlines are expensive due to high fare rates. So, budget airlines bring a soothing to those people who are not able to pay such high fares. Although traditional airline have reduced their fares to give relief to their customers but still their fares are touching the heights. With the arrival of new budget airline in the market, competition is increased which will certainly lead to ameliorate service and much more savings ( Todd Daon). Like the two sides of a coin, budget airlines also contain some benefits and some drawbacks also. Budget airline is becoming more popular among the people because of its low costs. Besides low cost fares, budget airlines also introduce different schemes which convulse their ticket prices even further for a limited period. But you have to be in touch to get the better deals. You can not get discount in purchasing round-trip tickets through traditional airlines. But on the other hand many budget carriers offer low fares on one-way tickets which provides greater comfort in travelling. One of the attractive features of budget carriers is that their fleets are usually made up of new or at least renovated, planes. Budget airlines try to maintain their budget by applying extra charges and taxes which are not included in the ticket’s fares. So, this can double or sometimes even triple the original fares. Budget airlines also charge for all kinds of services e.g. amusement. These airlines have a strict “no refund” policy which causes great inconvenience in case of any emergency. These airlines often service remote airports which will need additional travel and time (Kim Wildman). Budgeting counts a lot in maintaining a company e.g. in a huge organization, the marketing manager would submit a budget which describes the details of the advertising expenses for each budget period. Companies get a lot of benefits from a budgeting program which includes: A. Budget provides aims and targets that serve as backbone for excellent performance. B.The budget process also unfolds many potential constrictions before their occurrence. C.Budget also provides a platform to communicate plans about management. D.Budget provides a right path to think and act upon the right decisions otherwise managers would spoil their time in dealing with daily exigencies. E.Budgeting motivates each and every person of the organizations to move in the right and same direction. On the other hand, the companies that neglect the value of budgeting. They have to face the risk of lack of labours and then they have to hire labours which cause great difficulty. As budgeting is beneficial for an organization but sometimes it is not beneficial to the employees of that organization as they can not get the actual share of the profit earned by that organization (Rich, 2008). In case of any Government, budgeting plays a part of backbone as a country can not progress without planning certain affairs. Before preparing a budget, Government check its income, its imports as well as the under processing projects and the amount required for the accomplishment of these projects. Keeping these all factors in mind, Government takes such steps which help it to maintain its budget policy whether by increasing taxes or by increasing consumer prices. But on the other hand, people of the certain country are badly affected by these budget policies and they are not at all contented by these budget policies (Bill Dorotinsky). In conclusion we can say that budgeting has both positive as well as negative impacts on our society depends on the people how they take it. Sometimes it causes depression in the people also. And sometimes it helps a lot to improve fiscal conditions of an individual. Reference: 1. Jonathan Bradbury,Definition of Budget. 2. Asantewa, D’Lle. Budgeting:a Process, 2003. 3. Mellisa Bushman, May 02, 2007. 4. Gattermann G,Budgeting pros and cons. 5. Marily, 21 March, 2006. 6. Trent, April 2008. 7. Todd Daon. 8. Kim Wildman,MSN NZ Travel writer (April 15, 2008). 9. Rich, August 06, 2008. 10. Bill Dorotinsky, 2007. Budget Practices And Procedures. Read More