Focus on budgeting (2011 update) | AccountingWEB

Focus on budgeting (2011 update)

Despite its controversy, budgeting emains entrenched in financial management. An important tool for formulating and monitoring strategies, budgets continue to be formulated around negotiations based on the previous year’s figures.

CIMA’s Official Terminology of Management Accounting defines a budget as “a quantitative statement for a defined period of time, which may include planned revenues, assets, liabilities and cash flows. A budget provides a focus for the organisation, aids the co-ordination of activities and facilitates control”.

Although budgeting tends to come into play when a business takes on professional finance managers, CIMA’s Peter Simons argued even the smallest SMEs budget on their own terms. “Driver based budgeting and forecasting (for example, the window cleaner’s streets, doors and houses cleaned) have the advantages that they can provide a more accurate projection of financial outcomes,” he said.

For more background on all of these aspects of budgeting, follow the links below:

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