Budgeting as Part of the Planning Function & Budgeting Process

The Importance of Budgeting in Planning Function

Task  250 words – 125 words per student

Return to the discussion forum and read the answers of your classmates. Select two classmates and reply to their posts (on both their perspectives about budgeting as part of the planning function and the budgeting process). Responses should be short (between 50 and 100 words each) and constructive even if you do not agree. Consider asking a critical question when you have a different viewpoint. You are also allowed to recommend readings or sources.

Student 1

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Budgeting as part of the planning function

Planning is one of the primary tasks of management, and budgeting forms an important part of this process. The budget can be thought of as “putting your business plan into action”, expressed in financial terms (Bailey, 2021). Budgeting involves setting out planned income, expenditures and cash requirements based on projections and assumptions, and needs to be constructed, co-coordinated and controlled (Bronkhorst, 2021).

The length of planning horizons is the key difference when it comes to higher and lower levels of management; higher management levels conduct long-term plans (at least 5 years in duration) which provide the overall strategic direction for the business, whereas short-term plans are conducted by front-line managers who are familiar with their costs and operating results (Bronkhorst, 2021).

Budgets are an essential business tool, requiring that management takes part in advanced planning, allowing for early analysis of issues, optimum utilization of resources and adaptation to changing circumstances. It’s important to recognise that a budget will not be perfect, it is merely a forecast of the future. It must also be realistic and attainable.

The budgeting process

This often starts with looking at the projection of expected sales during a specific period.  While it may be tempting to simply take the previous year’s actual figures and just make minor adjustments, this can prevent critical re-evaluation of possible changes that may have been identified in the SWOT analysis or risk identification processes (Mara, 2020).  Variables which need to be taken into account include growth in GDP, the inflation rate, the exchange rate and expected interest rate movements (Mara, 2020).

The budgeting process includes establishing objectives, development of a detailed budget, compilation and revision of the budget, negotiation, and review, approval and distribution of the budget (CFI, n.d.).

Student 2

Unit 1 - Discussion Forum

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Unit 1 – Discussion Forum

Review the notes that you made from the readings. Create a thread and post your thoughts in the Blackboard discussion forum. Using no more than 300 words, reflect on:

Budgeting as part of the planning function

In my view budgeting is one of the most important aspects of the planning function as this creates a spending plan for your money and can help ensure there is always enough capital to pay for both necessities, and other expenses for the business. Furthering that point a budget is a great tool to avoid credit card debt, or unnecessary debt, and encourages good saving habits. This greatest a great teaching and learning experience not only for corporates just starting out but for families wanting to instil good money habits for the children and is also a great path to creating generational wealth. This is all achieved by good budgeting and planning. A last great pint is that by planning a budget it could help one with debt consolidation. It’s never too late to start planning ahead with a good budget.  

The Budgeting Process.

In essence the budgeting processes is the process of putting a budget in place. Although, an important aspect to remember is that the future is uncertain, and it therefore becomes difficult to plan accordingly and thus a budget will never be perfect. Though planning to one’s best abilities is imperative, and any budget is better than no budget. This why it is also important to follow a process. Some of the steps to follow include, projecting expected sales for the upcoming planning period, revaluate and conduct a SWOT analysis and to try estimate the upcoming inflation rates, exchange rates, employment levels and current government policies. It is always a good idea to consult with companies that do such predictions.