The Budgeting Process
A budget is a quantitative statement, usually in monetary terms, of the plans and expectations of a defined area over a specified period of time. Budgets provide a foundation for managing and evaluating financial performance. Budgets detail how resources (money, time, people) will be acquired and used to support planned services within the defined time period.
The budget process also helps ensure that the resources needed to achieve these objectives are available at the appropriate time and that operations are carried out within the resources available. The budgeting process increases the awareness of costs and also helps employees understand the relationships among goals, expenses, and revenues. As a result, employees are committed to the goals and objectives of the organization, and various departments are able to coordinate activities and collaborate to achieve the organization’s objectives. Budgets also help management control the resources expended through an organizational awareness of costs. Finally, budget per- formance provides management with feedback about resources management and the impact on the budget.