Chapter 9: BUDGETING

A business should plan over long, medium and short term

Long term –Strategic planning formulated for a planning period of five or ten years plan
Medium term – tactical planning –prepared in greater detail-focuses on next two years
Short term- Operational planning- covers daily, weekly and monthly planning at operational
level. Need to be consistent with medium term plans, entity operating standards and
policies.
The above can be seen as planning hierarchy with its own planning targets.
Budgets are medium term plans expressed in financial terms for the business. Prepared
annually and covers next financial year. Budgeting can also be described as planning at
tactical management level. As annual plans they must be consistent with strategic plans of
the organisation. Provides useful benchmark for shorter term.
Purpose of budgeting
Mnemonic – PCCCEMA –planning , control, communication, co-ordination,
evaluation,Motivation, authorisation and delegation.