What is balance sheet (budget): Budgeting means planning for the future in order for the company to reach the goals it wants to achieve

That means if the company wants to connect to the goal of achieving a profit of one million pounds, then a detailed plan must be made for the amount of sales to be achieved, the sales price of the products, what is the amount of raw materials and materials purchased, the payments required from the company, the duration of production hours, the number of workers, the value of salaries and other additional costs that the company bears Therefore, in order for the company to have good control over its departments, there must be a good plan this good plan is through a practical method and system called budgets...

What are the functions and roles of the budget

1-Budgets are considered as a group of tools

Planning tool and / it is considered a written plan for the future and is a commitment to manage the company to operate in its borders and through working to implement the objectives of which was the budgeting and planning process and be different time periods and take into account the conditions and economic conditions expected include short-term goals and long-term goals.

Monitoring administration

The basic idea in the subject of monitoring is to know the reasons for the differences between the actual results and the estimates placed in the budget. The first step is identifying the deviation, then analyzing its causes, then proposing appropriate methods for treating the deviation from the analysis of the actual performance deviations from the estimates placed in the budget for this performance or for this section and determining the deviation is the first step in the process Control over the company After identifying the deviation, there are four main steps, which are the stages of budgets. They help companies control costs by setting cost limits and guidelines.

Coordination management

All budgets must be linked to each other and have a primary objective set by the higher management; Meaning, there must be coordination between the sales and production plan, otherwise it is possible for the sales department to contract sales orders greater than the company's production capacity Therefore, budgets are among the most important goals of coordination between departments in companies

.Communication management

It helps the employees to clarify the goals of the company and also the process of communication between the various administrative levels of the company so that it is necessary for all members of the administration to know the plans and their dates, and every member must be aware of the sub-plan of the aspects of the activities related to it and how the sub-plans relate to the main plan Related completely to the company...

Motivation Management

Budget helps to motivate employees to perform the work of the company is good and in the case of the employees participating in the preparation of the budget, it is a good incentive to have to accomplish the goals of the budget and that the budget should be realistic plan before what is motivating tool.

The budget is a formal and quantitative criterion for management plans

The goal of the company is to increase market share and increase profitability

And the ability to disburse profits to shareholders

In order to enhance the value of the company and raise its shares, these goals cannot be achieved without careful planning that equates the resources available to the company and the actual results. The managers of the company must adhere to the plans for the budget to succeed

the role of budgets in the formulation and monitoring of short-term goals

The role of the budget is a short-term goals such as increasing the development of the company's market share in dividends to shareholders and pay regularly at regular intervals and monitoring of sales revenue per month and setting spending limits for each section of the company cannot be exceeded The basic idea It monitors the goals in every short period of time in order to be able to operate the control properly, for example, the company cannot set a sales goal  Every six months, let it be a million, because it can reach the fifth month, for example, and sales are still 400 thousand, which mean that there is a problem So if the company sets short-term goals monthly, for example It can correct any deficiencies or deviations in the company's departments, and in this case, in the second month, you can correct and handle with the deviation of the sales volume

The role of budgets in measuring the actual performance of the company in comparison with the target set

The budget for each department and each director develop a set of goals, both quantitative targets, such as the amount of sales to manage the sales or the amount of production management and manufacturing production or special budget targets Such as monitoring actual spending with budget numbers and reporting on that, and the difference between actual and estimated spending is called a deviation

Characteristics and components of the successful preparation of budgets

In order to properly create budgets, there must be some element
 

1-There will be participation between the managers and heads of departments and divisions of the company and others

In the development of the budget estimates so that these issues represent estimates and are considered targets can be achieved and this in the light of the possibilities and resources available for each section of the company's departments. This is of course, is a commitment to these managers to achieve the goals set in budgets Therefore, a set of factors must be taken into consideration, such as the ability of the marketing department of the company to achieve sales goals and the ability of the production department, for example, to provide the finished products, and that is through the production capacity available to the company And also the availability of sources of purchase in a timely manner For this, a budget committee is formed, and its primary role is to achieve compatibility between the established objectives and the available capabilities and to determine the needs of the company Then, visualize or determine the production capacity of the company and also arrange funding  sources to achieve the budget target

.2-Determine the responsibility of each department and department for the results it must achieve and the associated costs

There must be a program for each department separately and its relation with other departments in the company and to determine all that is required to implement each cost program and thus achieve budgets One of its objectives is that it is considered a tool for identifying production and service programs and determining the responsibility for implementing these programs and in order to determine the costs associated with the implementation of these production programs. The company must have a study of the productive capacity as well as the availability of alternatives that lead to achieving good results and optimal use of resources
 

3-There should be budget estimates based on an economic study

This is done by studding the use of prediction methods Especially price prediction and sales volume in each region and estimating elements of production and marketing costs by studying previous time periods

And also estimates of expected profits by studying the net sales of companies after excluding discounts, and this is through rates by studying income lists and the value and dates of deduction during previous years, as well as making an estimate and studying variable costs and fixed costs as well as the estimated rate of income tax according to tax legislation and thus estimate the total profit and net Profit before tax and an estimate of the expected net income in the budget year

4-Budget preparation period

In order for the budget to be successful, the budget preparation period must be an appropriate period and it is prepared before the beginning of the current year and needs months before preparing it and determining the outlines of the main budget this year (for example, the company takes a decision to reduce expenses and costs in proportion to all departments) A decision like this must be taken early before The rest of the departments set their sub-budget

Budgets must be well planned

That means each of the sub-sections has a specific deadline whose budget must be sent to the budget manager because the budgets are all linked to each other in the sense of the production budget linked to the sales budget, meaning in order for the company to determine the quantity of production required, it must have the estimated sales quantity Budgets must be well planned that mean, each of the subsections has a specific deadline for sending its budget to the budget manager Because the budgets are all related to each other, meaning the production budget is linked to the sales budget, meaning in order for the company to determine the quantity of production required, it must have the estimated sales quantity then The budget manager collects sub-budgets and creates a general budget, and the budget manager is not responsible for the budget estimates because each department is the one who assesses its activities and there must be a budget guide for department managers who prepare sub-budgets so that it is clear to them the type of information required of them and the form and method of the budget And that the budget instructions are distributed to all departments because the budgets are linked to each other, and the distribution of instructions works to coordinate the interdependence between the departments
 

5-An integrated set of reports

There must be a set of reports to follow up the implementation of the budget accounts programs at regular periodic intervals and this is to address deficiencies early in any part of the company and the budgets are prepared at different annual, semi-annual or quarterly and monthly periods so that it is easy to follow the budget and also to amend the accounting programs special elements of income and expenses in light of the changes that occur in the market and in accordance with the conditions of production, marketing and finance, as well as a detailed analysis of income and expenses

6-An integrated accounting system

There must be a good accounting system through which analytical data can be extracted for costs at the level of products and production centers, and also through which any analytical data can be extracted for any financial accounts such as sales, purchases, etc