Budgeting and Financing a Business

Budgeting and Financing a Business

Point of View

I hold a dissenting view regarding the said statement. A budget is described as a formally made document containing goals and plans of a firm regarding finance. Different organizations and firms prepare their budget at different times of the year (Adila, 2015). Some prepare them quarterly, semi-annually and other annually. The sequence of preparing a budget mostly depends on the policies that enclose an organization (Yuliastutik, 2016). Every business needs a budget. Therefore, the concept that a business does not require a budget is misleading (Adila, 2015). Lack of a budget in any business may lead to the setup’s failure.

Value Budgeting

Setiawan (2017) claims that budgeting is important to every firm and organization. It helps them prioritize on investments and other projects, which will in turn bring maximum profits. A budget helps the set ups invest on those projects and investments that will bring the firm into another level. So According to Adila (2015), to maximize returns in a firm, a budget helps a firm focus on an investment that best utilizes the resources available. In addition, a budget enables a firm or an organization to focus on meeting its objectives and the goals set. Every organization focuses on preparing a budget that aids the company achieve its goals to success (Purwaningsih, 2014).

A budget helps an organization to brace for its future. For an organization to succeed and focus on its future, it has to measure the resources at hand and the decide on the best investment to put the said resources. Any business succeeds if it utilizes its current resources effectively (Purwaningsih, 2014). A budget enables a firm to measure its level of success and failure depending on the resources allocated to each department in the firm. Setiawan (2017) argues that a budget is said to be result oriented and so does the performance standard of an organization.

Characteristics of Budgeting

Yuliastutik (2016) explains that decision making provision, coordination, control and planning are the different characteristics of budgeting. Budgets provide decision-making. Budgets render guidance regarding financial decision making for all managers within all firms and organizations. An example include projects anticipated to give back maximum returns to the firm. This will ensure that managers do not invest in projects to benefit themselves but for the sake of entire firm. Organizations should control their expenditures to manage its resources effectively. Effective budgeting enhances control of expenditures of all organization within the limits of the annual incomes (Setiawan, 2017). If the firms fail to control its expenditures, the failure would entice supervisors in charge to misuse the public funds.

To achieve an organization’s future success, planning is inevitable. Budgeting will enable the firm plan the current resources to actualize future success. An organization’s prosperity depend on the current plan of the firm (Yuliastutik, 2016). The goals set by firms are planned to meet the standards and goals outlined by the company’s management. Mission, vision and goals drive the firm to success. However, planning for this prosperity is critical. All firms have enshrined goals to be achieved by all departments. Integrated budgeting allows firms to coordinate all the functions of the firm to meet the principle goals. Failure to coordinate the organizations’ activities would lead to disintegrated functions creating loopholes, which could be used by corrupt managers (Yuliastutik, 2016).

References

Adila, V., 2015. The implementation of management audit to evaluate financial function (Case Study at PT. Perkebunan Nusantara X (Persero) Surabaya). Journal of business administration, 24(2).

Purwaningsih, E., 2014. Pengelolaan Sarana Pembelajaran (Studi Situs Pada SD Negeri Cemara Dua No. 13 Surakarta) (Doctoral dissertation, Universitas Muhammadiyah Surakarta). Pp.35-70

Setiawan, B., 2017. Formation pattern state defense reserve components in five countries of asean. Journal of Business and Behavioural Entrepreneurship, 1(1), pp.24-39.

Yuliastutik, E., 2016. Implementasi sistem informasi anggaran keuangan (e-budgetting) (Doctoral dissertation, Universitas Muhammdiyah ponorogo). Pp.57-90.

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