Assignment Week 10 Purpose of Budgeting

Santiago Domínguez Castillo

Cost and budgets – BUS235 – UNAD FLORIDA

Professor Alicia Silva

August 2021
Introduction

Is it impossible for you to budget and save for expenses, no matter how far in advance you
know about them? Does the word “budget” give you a sinking feeling in the pit of your
stomach?

If the answer’s yes, you’re not alone. A 2019 Debt.com poll found that only 67% of American
households prepare a monthly budget.

The good news is there’s a budgeting system out there that will work for you — even if you’re
not good with numbers or saving money. There are as many ways to budget as there are types
of spenders. However, the first step to figuring out the right one for you is knowing some of the
main reason’s budgets fail and how to avoid the most common pitfalls that can lead to
frustration and failure.
Development

Budgets are created once a year.

In today’s fast-paced world, your budget could be out of date within a month of creation. A
budget can quickly become outdated once they’re created but this doesn’t stop people from
trying to hit those outdated numbers. In any business, there are constant, last minute changes
to cash flow and charges.

Instead of spending weeks at a time preparing for the upcoming year, try creating a system
that can be easily updated on a month-to-month or regular basis using a rolling budget
forecast, instead of a number you came up with 9 months ago.

Budgets drain your resources.

Budgeting is often a time consuming task for business executives and their finance teams
because it usually requires specialized knowledge to use, and extensive number-crunching.
Not to mention if something changes drastically, the entire thing has to be redone to reflect any
changes.

Breaking down silos is another big issue, with companies looking for more collaboration and
open communication between different people and teams. While it’s certainly true that you
don’t want too many cooks in the kitchen (or too many hands on your budget!) you also don’t
want to have to handle every single budget-related request yourself.

Try finding a streamlined budgeting process, that is easily accessible to everyone, and can
redirect that saved time and mental energy toward other things like your strategy and spending
data.

Just because you create a budget, does not mean everyone in your organization is going to
stick to it. Just as our personal budgets change, employees have costs that you may not have
taken into account when planning.

Try giving each department head a number to divide among their teams with restrictions that
can be adjusted as need be. Check in on that budget each month or as often as necessary to
ensure that no budget shortfalls are happening and that cash flow is where it should be.
Another great way to manage your budget is to actually involve your employees. Be
transparent with the numbers and what you are spending money on for the business. The
more they realize it’s not a bottomless pot of gold, the more they will feel accountable and want
to help keep things in order.
Closure

Finding a budget that works for you and your family and sticking to it is both an art and a
science. It can also be an exercise in frustration. However, a reasonable budget can help you
turn money into a tool you can use to make your life better, happier, and more productive.

When you’re asking yourself why your efforts at sticking to a budget have failed in the past,
keeping your goal in sight helps you find the right strategy for you to make your budget a
success. Once you get into a rhythm with your monthly budget, you can create a special
holiday budget to start planning for the extra expenses that time of year brings too.
Reference list

• Chapter 18: Perspectives and Overview:

BUDGETING, Profit Planning and Control. Glenn A. Welsch, Ronald W. Hilton and Paul
N. Gordon, published by Pearson Education, Inc., published as PRENTICE HALL INC.,
Copyright © 1990. 5th edition, all rights reserved. ISBN-13: 085754-8.

• “Why Budgeting Fails: One Management System Is Not Enough “:

https://www.horvath-partners.com/fileadmin/horvath-
partners.com/assets/05_Media_Center/PDFs/englisch/
BSC_Report_2004-10_Why_Budgeting_Fails_Horvath-Sauter.pdf

• “An evaluation of budgeting approaches: Traditional budgeting, better budgeting,

and beyond budgeting”:
https://www.researchgate.net/profile/Ali_Uyar2/publication/303911248_An_Evalu
ation_of_Budgeting_Approaches_Traditional_Budgeting_Better_Budgeting_and_
Beyond_Budgeting/links/575c84eb08aec91374abc74c/An-Evaluation-of-
Budgeting-Approaches-Traditional-Budgeting-Better-Budgeting-and-Beyond-
Budgeting.pdf