Characteristics of successful budgeting
Do you know how important a budget is for running a successful business?A budget is an estimate of income and expenditure for a fixed period. It is a financial document. It records Past expenses, and plans for the future income of expenses. It helps to achieve the financial target of any enterprise. A well-planned, flexible and practical budget is the key to success for an enterprise.
All financial plans achieve success because of successful budgeting. From everyday expenses to managing a worldwide business, everywhere a sound, practical, flexible and well-designed budget is required.
There are various types of budgets.
- Master Budget
- Operating Budget
- Cash Budget
- Financial Budget
- Labour Budget
- Static Budget
Feature of a successful budget is an important topic of the CMA USA exam. It is a professional course. It is offered by ICAI, Institute of Cost Accountants of India. Many colleges in India offer this course both online and offline. According to the CMA, the curriculum budget is one of the most important topics to be prepared for the exam.
Let's have a look at the important features of a successful budget.
The main features of a successful budget are:
1. It should be well-planned and practical
It should include the short and long-term plans of any company. It should focus on the goal of the enterprise. A well-designed and practical budget is always workable. It should include all sorts of long and short-term plans and expenses with a practical approach.
2. It should have flexibility
A flexible budget is always a successful one. To execute the plans and achieve the goals, a budget must be flexible. A flexible budget is always a practical one because it can modify its plans according to the demand.
3. It should be inspiring and motivating
If a budget can motivate the employees of an enterprise then it can fulfil the target of the company. An inspiring budget can improve the financial performance of an enterprise. It can also improve the overall performance of the company.
4. It must reflect a sense of ownership
A successful budget should reflect a sense of ownership. It is important forthe enterprise. It should be presented based on the standard performanceof a company. A budget should have great acceptability.
5. It should be Coordinated
A successful budget should be well coordinated. It should operate flawlessly within the different units of an enterprise. The main budget should include all the individual budgets to create an integrated plan.
6. It should have a great representation
It should correctly represent the agenda and expenditure. An incorrect budget compels the employee to make budgetary slack. Budgetary slack is a process of lowering revenue and increasing expenses.
It can not be supported by managers and employees. It is expressed in monetary or quantitative terms in the budget.
7. It should track the spending
A Well designed budget always tracks the spending. It must include a perfect App for tracking. A budget worksheet helps to resource and guide the company. Analysis of cost, revenue, and taxes gives clarity to a budget which makes it successful and profitable.
8. It should be flexible
A budget should be flexible. A flexible budget easily can fulfil the goals of the enterprise. But a rigid budget can not help the company to achieve its goal.Any changes shall be accepted flexible way . If a budget is rigid it cannot be functional.
9. It should have a correct number of spending categories
A successful budget should show the accurate value of spending categories. It will help the company to figure out the spending patterns of the company. It should break down the big expenses to show the way of money transactions and expenses.
10. It should categorise the irregular expenses
It is not easy to track the irregular expenses because they are considered regular expenses and they only come once or twice a year. A successful budget should include the correct amount of this type of irregular expenses of an enterprise.
11. It should include savings
An important feature of a successful budget is that it should include the amount of savings also. If a budget includes savings as expenses then at the time of emergency the company can take help from the savings fund.
12. It should have regular reviews
A budget with a regular review at intervals of two or three months. An enterprise or any startup can have an increase or decrease in expenses. So regular review and monitoring are required for a successful budget.
13. Accuracy in forecasting is essential
A successful budget should be accurate in forecasting. It assures progress in the development of a company. Accurate forecasting is necessary to take long-term financial planning.
14. It should include diverse plans
A successful budget should include short-term and long-term financial plans. The budget should be designed two months before the fiscal year. Long-term plans should cover at least three years and they should be done every quarter.
A successful budget is a key to success for an enterprise, company or anyentrepreneurship. It shows an action plan which paves the way for the company to plan and execute the expenses. A successful budget should have the active cooperation of the entire organization.
To be a successful professional Certified Management Accountant you must clear the CMA exam and Budget is one of many important topics of this course. After clearing the CMA exam you will be an expert in finance,accounting and any decision-making of an enterprise. So if your target is to be a CMA professional you have to upgrade yourself according to its course and syllabus.
Budget and budgetary policies and controls are important topics of the CMA curriculum. A business budget is a wide area in the CMA exam. A successful budget should always motivate all employees to fulfil their financial goals. So budgeting is a team work and success lies in its transparency and effectiveness.
