A budget management protects you from any financial loss in future. It also allocates money to different sections according to their needs. This ensures that you will have sufficient money for all of your area for your maintenance. A budget also helps you to maintain your cash flow without over crossing your budget limit.
The important thing in budget is that if you have any area which are going through hard time or having many financial losses. You can recover the financial loss from the other area which is generating profit.
All successful company has good budget management. To make an organization successful it must have planed budget management. Bad budget management or mistakes in budget management can lead a company in risk. A company going in a risk means many employers working in the company also have risk in finance. Instead of putting many lives at risk we can plan our budget and can aim to get maximum profit.
A good budget helps you to use all the resources you have effectively. A typical budget allocates funds for payroll, general expenses, equipment, services, taxes and miscellaneous expenditures. Careful decisions have to be made regarding the amount of money spent each month on specific items. For instance, a manager may have to postpone purchasing a new piece of equipment that has the potential to help the company produce more in order to make payroll. Payroll is a budgetary expense that cannot be spent arbitrarily or sacrificed for other costs. Instead, the manager must project how long it is expected to take to acquire the necessary funds to purchase the desired equipment. This type of decision is common in budget management.
Effective planning and financial control will help departments to:
- ensure the efficient and effective use of resources
- make sound business decisions
- demonstrate accountability
- take remedial action where needed