Budgeting Essay Example | Topics and Well Written Essays - 250 words

Budgeting - quiz ExampleForecasting should not be mistaken with budgeting. Forecasting is a management tool apply for architectural planning and setting a goal. Forecasting makes use of past and present data, and trend analysis to view sales, or to estimate demands for a product. It uses statistical data in estimation and uses management expertise, knowledge and judicial decision (GeminiGeek, n.d. )An operating budget is a projection of estimated income and expenses that is based on the forecasted sales which is usually done for a short term period, normally for one year while a cash budget is a way of monitoring the cash flow of a melodic phrase. Cash budget makes it easy to see how much money comes in and out for the period, thus, it becomes a simple way to monitor the financial condition of the business or household. A cash budget can be done either on a weekly or monthly period for an accurate monitoring (Business Directory, n.d.) vigour budgeting departs from the traditio nal budgeting wherein all expenses must be justified for every new budgeting period and every function within the organization is analyzed. Zero budgeting starts from zero and does not take into account prior years budget (Cronin, Tom). For instance, if you have a budget of $20,000 for a range in 2011 and it did not produce good result, the manager must guarantee why he needs the same budget for 2012. The manager must develop a plan from zero-base and justify why, where and how he will spend the money of the company. In other words, if the manager proposes a campaign for a product, he would pinpoint the projected expenses and profit to show its feasibility so that the company could put a particular budget for that. All budget proposals are then analyzed and ranked consort to importance. The system lets the management identify priorities, allows management to compare and analyze the needs of every unit in the organization and make funding allocation. In zero based, budgets are bu ilt