Budgeting Policy in Managing a Business

Budgeting is unitary of the fundamental concepts in managing a business and it is often up to the budgeting policies that the managers decides upon that ordain conclude where the company is deprivation to make it in the industry or not. The budgeting polity a company decides upon will show the blow over focus team up where the money is being spent and, even more importantly, it will show the team prior to the spending actually occurring.If we refer to the four management functions (organizing, planning, directing and controlling), budgeting covers all four of them. Indeed, a responsible manager will be able to apply all four functions in what the budgeting policy is concerned.First of all, the top management will need to determine what the companys budget for the future period of era will be. This will need to take into consideration both the companys possible revenues during this time and the expansion system that the team has decided upon. It may be the case that the manag ement team has designed an expansion on the market that will take up more of the resources than otherwise. While this may be the case, the spending essential be determined by realistic plans and future achievements.Second of all, the top management team inevitably to organize the portfolio of projects and the investments it wants to develop in the subsequent period of time. Organizing the portfolio of projects also refers to determining (1) which projects of the portfolio will be do and (2) with what priority. Before the actual spending and investing begins, the company needs to have a organized touch on of future spending steps.The planning functions intervene in terms of justly determining the evolution of projects cost in the period to come. Budgeting helps plan projects costs so that we dont arrive at a situation where the companys finance is overwhelmed by costs during a period of time.In terms of directing, budgeting ensures that the funds argon used where they are most n ecessary. Directing also refers to demanding and the budgeting policies are direct means by which the top management leads within the company.Finally, the controlling function is essential in budgeting policies and strategies. Indeed, the controlling function ensures that the budget and the budgeting policies, previously schematic and decided upon, are fully respected. There is no point in having a healthy fiscal system within the company, corresponding to a well-planned budget, if this budget is regularly underestimated or overspent. The controlling function will keep track of projects cost evolution, track down any inadvertences that may appear and correct them in time.As we have seen from those previously presented, the budgeting function within the company is not only intrinsically tie in to management, but the main functions of management are also reflected in a companys budgeting policies. It is essential, as pointed out, that the company properly analyzes what its sources are, how much of them it is willing to spend and, additionally, what future results and added value the investments will bring at a certain(prenominal) point in the future, in terms of the rate of return.A healthy budgeting strategy will lead to a healthy financial situation of the company and a solid development strategy for the future. Budgeting should be where every company strategy should begin.