PROFIT AND FINANCIAL PLANNING
The process of managing a firm is facilitated when management charts its course of action in advance. One systematic approach for attaining effective management performance is profit planning or budgeting .Budgeting helps to regulates flow of funds which is a primary concern of Ny firm
In this case a budget can be a comprehensive & coordinated plan expressed in financial terms for the operation and resource allocation of the enterprise for some specific period in future. The two aspects of every operation are revenues and unquantified revenue and expenses related to a specific operation.
Purposes of Budgeting
1. To state the firms expectations in clear formal terms in order to a void confliction and to facilitate their attainability.
2. To communicate the expectations to all that are concerned with the management of the firm so that they are understood, supported and implemented
3. To provide a detailed plan of action for reducing uncertainly and for the proper direction of individual and group efforts aimed aimed at achieving goals.
4. To coordinate the activities and efforts in such a way that the use of resources is maximized.
5. To provide a means of measuring and controlling the performance of individuals and to supply information on the basis of eachnecessary corrective measure to be taken.
Essentials of Budgeting
The following are some of the important or fundamentals of a successful budget:
A budget should have top management support
It should be set on clear and reastic goals.
Authority and responsibility must be assigned for effective implementation of the budget.
A good accounting system should be put in place to take care of the budget.