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An essentail management tool that communicates management's plans thtoughout the organization, allocates resources, and coordinates activities
A quantitative plan for acquiring and using resources over a specified time period
Developing goals and preparing various budgets to achieve those goals
The steps taken by management to increase the likelihood that all parts of the organization are working together to achieve the goals set down at the planning stage.
Advantages of budgeting (6)
- Communicate management's plans throughout the organization
- Forces managers to think about and plan for the future
- Means of allocating resources throughout the organization effectively
- Uncover potential bottlenecks before they occur
- Coordinate the activities of the entire organization
- Define goals and objectives that can serve as benchmarks for evaluating performance
A manager should be held responsible for those items-and only those items-that the manager can actually control to a significant extent
Continuous or perpetual budget
A 12 month budget that rolls forward one month (or quarter) as the current month (or quarter) is completed.
Self-imposed Budget or participative budget
A budget that is prepared with the full cooperation and participation of managers at all levels
Advantages of self-imposed budget (4), limitation (1)
- Individuals at all levels of the organization participate and their views and judgment are valued
- Budget estimates by front-line managers are more accurate and reliable
- Motivation is generally higher and creates commitment
- No excuse about an unrealistic or impossible to meet buget imposed from above.
Lower level managers may allow too much budgetary slack.
Committee responsible for ovreall policy relating to the budget program and coordinating the preparation of the budget itslef. They resolve difficulties and disputes relating to the budget and approves the final budget
A number of seperate but interdependent budgets that formally lay out the company's sales, production, and financial goals.