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BUDGETING - Coursework Example

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Budgeting [Author] [Institution] Budgeting Keeping a budget the moment you start a business is one of the cleverest steps to begin with. Budgeting manages the financial position of the business and keeps the finances on track. A budget plan gives an appropriate estimation about the practicality of the plans business is deciding to undertake in the upcoming years…
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Download file to see previous pages... Business planning, being one of the internal processes, can be made more successful if the business prevents any implications and problems in its projects and practices its being planning about. Budgeting helps these processes in the most effective way by managing the cash flow and helps you to decide when to invest in which project you have planned at the right time which will produce the best results. All during the business planning, a budget plans helps to control the finances, gives you assurance whether you can fulfill your ongoing commitments or not, helps you to decide the best financial decision which fulfills your objectives and last but not the least, it helps to plan and gives you estimation regarding the money you can spend on your future expansionary plans. Budgeting should not be mixed with the forecasting because unlike a forecast, budgeting is a ‘planned’ outcome which the business thrives to get to its achievement (Peterson and Fabozzi, 2002). When it comes to business planning, it also includes one of the most technical business tasks which is decision making. Budgeting improves this decision making process because it gives you a clear cut idea that which plan is practical and which can be fulfilled with the finance in hand. With the help of effective budgeting skill, a business can never run out of cash or even some issues are detected in cash flow, they can be easily found out and fixed before time. This clearly gives a deep understanding about the relationship between budgeting and business planning (Peterson and Fabozzi, 2002). These two benefits the business if done effectively and efficiently together. Budgeting being the provider of control and accountability over the finances and revenues of the business, aid business planning and make it successful. The reasons behind a planning are fulfilled with the help of making a budget but it never helps the most when it comes to business control. This is an entirely different thing and cannot be related with budgeting. The above explanation illustrates how budgeting can be a great help in planning and it’s actually doesn’t play any vital role in business control. With the help of Capital budgeting, evaluation of investment proposals can be done easily in the best possible way. Such type of budgeting actually helps a business to decide which proposal should be ranked first so that it can be undertaken and investment can be made on it. For any investment, a business needs a proper financial plan because it will be business’s finances and capital returns which will be invested and benefits in the future will be gained and as budgeting is a part of financial planning, so without it, an investment proposal cannot be evaluated (Wildavsky, 1996). When it comes to evaluation, the first thing to do is to come up with all the possible strengths and weaknesses of a specific proposal, and when it comes to investment, business has to be really careful and should dream of only fulfilling those proposals which can be undertaken and comes in the boundary of business’s finances. In capital budgeting, the speed of evaluation process gets geared up as by using this method; those proposals are top ranked which include no real choice for example replacing a leaking sewer line with an updated one, as this one will remove any ...Download file to see next pagesRead More
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