SITXFIN004: This Unit Takes This Process A Step Further By Teaching You: Prepare And Monitor Budgets Assignment, VU, Australia

Introduction

This unit takes this process a step further by teaching you how to analyze financial information, then create and monitor budgets. You will learn the process of drafting and finalizing a budget through examining the influence of internal and external factors, negotiating with relevant personnel, and reflecting organizational policies and procedures.

Budgets are a forecast or a projection of future earnings and expenditure over a period of time and can also be referred to as a financial plan, forecast, or target. Having a robust understanding of an organization’s goals will assist in creating an attainable budget whether for a project, department, or the business as a whole.

Chapter 1: Prepare Budget Information

Before a budget can be developed and implemented there must be an understanding of exactly what it will detail and the period of time it will cover. Budgets should always align with operational goals and discussions should be held with the appropriate people before implementation.

The first stage of developing any budget is to determine its scope and nature. The scope is the range of the area or subject matter that something deals with or to which it is relevant. The nature of a budget is its features, character, and qualities.

Different budgets will have different scopes, for example, it may be to increase revenue through sales and revenue generation, it could be a budget to decrease expenses and outgoings, or it may be to expand the products or services being offered.

When defining the scope of the budget consider the following:

1. Objectives

2. Goals

3. Resources

4.  Schedule

Be sure once the scope and nature have been established it is included or is succinct with the organization’s budget as a whole. For example, if one of the goals is to increase revenue in the events department through increased marketing activities, then the sales department and marketing department budgets must reflect this. The benefit of defining the requirements of a budget is each manager then looks at the aspects they need to control and to take responsibility for it.

Essentially, a budget is a forecast of income and expenditure (and profitability as a result of this), a tool used for decision making, and a method to monitor the performance of an organization. Having a well-defined budget assists in ensuring resources are available to support the growth and development of the business. So why is it important for an organization to have budgets along with understanding the scope and nature of them?

1. Facts: Budgets generally represent a thorough analysis that carefully outlines the expectations for each department.

2. Limit expenditure: A detailed budget has the ability to limit how much money is to be spent on certain areas of operation.

3. Creates financial roadmaps: A budget can be used to guide an organization and to assist with future growth and expansion.

4. Plan for future growth: Budgeting for future growth opportunities ensures the organization has capital on hand when required and can also be used during slow economic periods.