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Budgets are guiding maps that companies use in coming up with the proper use of their financial endeavors in a specified period. They highlight the financial arrangement for prospective acquisition and the use of resources. Likewise, they give the details of targeted purchases and sales, capital spending, plans on staffing among many other business plans in an organization. This is irrespective of the fact that they do not give guarantees since their adoption gives a guiding tool; by the end of the day the company is able to analyze the profits and losses. Organizations differ in size and their mode of operations and that is why budgeting is likely to differ. Every organization is guided by the motive of profit building in their business endeavors, hence there arises the question as to why companies or organizations need to embark on clear and up-to-date budgets that are effective in their operations.
The case study of Royal Company shows detailed budgets on targeted sales, production, material budget, both in purchases and money expected to do this, labor, selling and administrative expenses. The laid down budgets are crucial to this company given that it has to stick to them for the specified period. Moreover, unnecessary deviations are likely to occur, however, they may not make the budget cost figures deviate by far.
Budgets may pose challenges to organizations’ managerial departments. This is common in most newly elected CEOs, hence, it becomes crucial to involve representatives from various departmental units who would come up with their classified views and information on the subject in various segments of the organization. Therefore, this points out the importance of budgeting concept in companies/organizations. As pointed out, earlier organizations use various approaches to budgeting. Some use the top down budgeting system; the start is from the top management who propose the constraints under which the budget will be prepared. The process trickles down to other levels of management.
In addition, there is the bottom up budgeting system where the budgeting process starts with the low-level personnel. The personnel in this level provides the budget guidelines and the development of the budget. In both processes, there should be reliable data flow to give the guiding map on the budgeting process.
A number of transferable skills arise from the concept on ‘why organizations budget and the processes they follow to create their budgets.’ Focusing on the two methods of creating budgets (top down and bottom up), the skill of change in management comes to the limelight. Likewise, the two systems may seem not to work the same; one may work best than the other, hence, there is a need to embrace those groups who contribute to a working budget.
Communication is crucial in any organization, hence within the entire process of budgeting, communication is vital for sharing ideas and information. Leadership is still prevalent in this process because we have the top management sector, the middle level and the bottom levels. The top level has to offer leadership in executing the organizations’ daily routines to achieve the aspired goals and objectives. Budgeting has to deal with numbers and data, therefore, during the whole process of budgeting, the company has to deal with the available company data in preparing its budgets. On top, there is another skill, such as working as a team because there has to be communication in terms of exchanging ideas and information. Thinking, on the other hand, is inevitable since nothing is possible without applying knowledge and brains to evaluate problems. The effort is to come up with a budget which is sustaining to the company and that yields the aspired results, depending on the achievable set goals.
These skills are important to any team player in a company. One needs to access, develop and apply them in the future job opportunities. Other team members need to know and accentuate on them as an individual brand.
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