The Purpose, Benefits, and Stages of Preparing the Budget

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Business, Man, Business Man, Businessman

Budgets generally refer to a list of all costs and revenue plans. Budget is an important concept in microeconomics that uses budget lines to illustrate sales of 2 or more goods. In other words, the budget is the company’s plan expressed in monetary terms.

There are various types of expenditure budgets, namely sales expenditure budget, production expenditure budget, cash expenditure budget, marketing expenditure budget, project expenditure budget, revenue expenditure budget, and expeditor expenditure budget.

The Purpose of Making Bealanja Budget

Below are some of the goals for the company’s budget.

– Provides revenue and expeditor estimates, i.e. build models of how a business can run financially if it runs certain strategies, events and plans.

– Allows actual business financial operations to be measured against estimates.

Benefits of Compiling Company Expenditures
The benefits of preparing a corporate budget include:

– The business carried out by the company will run smoothly and successfully because it is supported by relevant policies and sound financial planning.

– Assist and facilitate managers in managing and carrying out every company activity.

How to Prepare a Good Budget

a. Determination of Budget Guidelines
Company budget guidelines are based on a year-long budget that has been prepared and prepared several months before the following year’s budget. In this preparation, top management is known as the basis for preparing a budget. Top management activities include:

– Determination of the company’s big plans as the basis for preparing the company’s budget. This big plan is prepared like the objectives, assumptions, and also the goodness of the budget made.

– Establishment of a committee to prepare a company budget for a certain period.

b. Budget Preparation
After top management activities, the company needs time to prepare a budget. In this case the preparation is not only for the staff in the finance department, but also requires solid cooperation from all divisions so that the budgeting runs perfectly.

c. Budget Determination
The next step is to determine the company’s budget which has been discussed and prepared in advance by many parties in the company. There are 3 stages in determining the budget, including:

– Each employee from each field discusses and negotiates the results of the preparations that have been made so that the prepared budget will be able to accommodate the needs of each section.

– Coordination and review of the components of the budget that have been prepared.

– Legalization and even distribution of the budget to all parts.

In this stage, the company management and directors will endorse after conducting a feasibility test and review of each company budget prepared by each part of the company which will be domiciled as a budget user.

d. Budget Execution
The final stage is the implementation of the company’s budget. This stage is the final step in the preparation of the budget which will then be decided in a single decision. Each budget user in each part of the company will start implementing the budget as agreed in the company budget. In this case each manager will supervise and then report to the directors whether the implementation of the budget in accordance with the plan agreed in advance or not.

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