Budgeting - Essential To Plan And Control Your Income And Expenditure
Be it at home or in the office you have people around you talking about the importance of budgeting. But what is budgeting and why is it so important in life? With regard to budgeting, the domestic and the corporate scenes are slightly different. At home we are more or less certain of the income that is earned every month. Therefore we need to budget our expenditure to keep a control over our finances. But in a corporate environment, the situation is different as the income as well as performance can vary, depending on supply and demand situation, external threats, socio-political developments and so on.
Therefore in a business situation we need to use various types of budgeting like capital budgeting, performance budgeting, incremental budgeting, fiscal budgeting and so on. Each one of these types of budgeting impacts the business performance in several ways, which would be discussed separately in brief later in the article. While on the topic of budgeting, it is not uncommon to find small businesses starting up with zero budgeting. A typical example of this kind is a home business focusing on internet marketing. Essentially this type of budgeting entails zero financial investment to start with. All that is needed is time commitment from the entrepreneur and computer/internet accessibility be it a stay-at-home mom or an unemployed individual.
In your quest for knowledge to know more about 'what is budgeting' you ought to have come across the term zero-based budgeting. This process of forecasting future expenditure does not take past or existing performance into consideration. It starts with a zero base, in the sense that the budget presenter gives a detailed analysis of costs involved to achieve the desired business goals, alternative courses of action to achieve the goals, various possible contingency situations and so on.
Now some details regarding the different types of budgeting that are usually heard in corporate circles, though this does not limit their application in a domestic environment. For example corporate budgeting is all about planning or forecasting the amount to be spent on capital assets or projects which is going to happen in the course of the following year. In the domestic environment this could mean buying real estate or even some major appliances for the house; in a business scenario this involves investing in property, plant and equipment, etc.
Incremental budgeting involves taking into account previous year's income and expenditure patterns into consideration and then adding any incremental amount (usually caused by inflation) to it to arrive at the current year's expectations. Though simple, this addition of an absolute value to the budget sometimes is not beneficial to an organization since it does not take into account the external forces which may impact the performance of the company.
Performance budgeting on the other hand, involves inputs of various departments in an organization including HR, IT, Procurement, Marketing and so on. Each departmental head has the responsibility to assess its current performance vis-a-vis budget and forecast its performance in the coming year. They are then held accountable for the performance of his own department.
Needless to mention that a vast topic like 'what is budgeting' cannot be discussed over the limited scope of one article. If you are keen to know more about the topic there are plenty of material available online which can make you a more aware person. Remember budgeting is an important tool to live and perform well and within means, be it at home or in the office.
Therefore in a business situation we need to use various types of budgeting like capital budgeting, performance budgeting, incremental budgeting, fiscal budgeting and so on. Each one of these types of budgeting impacts the business performance in several ways, which would be discussed separately in brief later in the article. While on the topic of budgeting, it is not uncommon to find small businesses starting up with zero budgeting. A typical example of this kind is a home business focusing on internet marketing. Essentially this type of budgeting entails zero financial investment to start with. All that is needed is time commitment from the entrepreneur and computer/internet accessibility be it a stay-at-home mom or an unemployed individual.
In your quest for knowledge to know more about 'what is budgeting' you ought to have come across the term zero-based budgeting. This process of forecasting future expenditure does not take past or existing performance into consideration. It starts with a zero base, in the sense that the budget presenter gives a detailed analysis of costs involved to achieve the desired business goals, alternative courses of action to achieve the goals, various possible contingency situations and so on.
Now some details regarding the different types of budgeting that are usually heard in corporate circles, though this does not limit their application in a domestic environment. For example corporate budgeting is all about planning or forecasting the amount to be spent on capital assets or projects which is going to happen in the course of the following year. In the domestic environment this could mean buying real estate or even some major appliances for the house; in a business scenario this involves investing in property, plant and equipment, etc.
Incremental budgeting involves taking into account previous year's income and expenditure patterns into consideration and then adding any incremental amount (usually caused by inflation) to it to arrive at the current year's expectations. Though simple, this addition of an absolute value to the budget sometimes is not beneficial to an organization since it does not take into account the external forces which may impact the performance of the company.
Performance budgeting on the other hand, involves inputs of various departments in an organization including HR, IT, Procurement, Marketing and so on. Each departmental head has the responsibility to assess its current performance vis-a-vis budget and forecast its performance in the coming year. They are then held accountable for the performance of his own department.
Needless to mention that a vast topic like 'what is budgeting' cannot be discussed over the limited scope of one article. If you are keen to know more about the topic there are plenty of material available online which can make you a more aware person. Remember budgeting is an important tool to live and perform well and within means, be it at home or in the office.
