Budget is defined as a balance between income and expenditure. It is wise to budget plan and prepare for the running expenditure and future needs depending on the company’s growth plans. It maybe a family run business wherein it gets all the more necessary to pay detail to a lot of issues…..which would involve maintaining and monitoring the family expenses/ children’s education/medicals/insurances/holiday planning/taxes/investments and sundry.
From the company’s perspective the CFO would play a role of advising and assisting in planning the finances,. The CFO would be supported by the auditors and the account’s team. The past experiences, learned mistakes would all have to be brought on the table with any new governing policies for the implementation of the budget.
Preparing and formulating the budget need to satisfy the organizational goals. Formatting an effective budget is a customized process taking into consideration the policies and nature of a business. The long term and short term goals must be clearly stated by the top brass. Feedback from employees or their immediate team leaders assist in newer perspectives and ideas that can be incorporated. As budgeting and income are based on targets to be achieved a reality check would have to be done with the field staff.
It is imperative to have the budget flexible and revised as it is based on projections and estimates for future operating results and financial positions. Managers must continuously check their budgets and correct them if necessary. Often management uses performance reports as a follow-up tool to compare actual results with budgeted results.
While working on the budget the debt factor as a heading which would otherwise relate as the company’s asset will have to be figured. The funds that are outstanding under the receivables column and the funds to be disbursed under the payable column get highlighted.
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