Budgeting Essay Example | Topics and Well Written Essays - 2000 words

Budgeting - Essay Example The intention of this study is a budget as a financial plan expressed in terms of money that helps budget holders achieve organizational goals and objectives in an appropriate manner. In construction industry, budget helps companies in the process of financial analysis. Through budgeting, management of the organizations can know the financial position of the organization. They can know what is actually going on in terms of capital use for business activities. Budgeting helps in providing the management with the information regarding available capital, current financial position, and future expenditures of the ongoing business activities. Through efficient budgeting, the organizations can save money and related expenditures regarding various business activities. Budgets help in cutting off the extra costs and make money available for use in other financial activities.Proper planning plays an important role in the success of a construction company. Budgeting plays a very important role in this regard. Planning is the second function of budgeting. After forecasting the financial position, a company decides its future activities, such as, investment decisions, loan decisions, and buying or selling decisions. Communication is another major function of budgeting. If an organization makes some sort of financial deal with another organization, budgeting is that technique which can resolve the issue related to use of capital between the two parties. Priorities can be set between the two organizations regarding the financial issues. An effective budget would help the organizations in communicating with each other for the purpose of discussing where the money should be spent and how much money should be spent. 2.4 Motivation Budgeting plays an important role in motivating staff of the company. After analyzing the financial position of the company, managers can develop such plans for the employees that are able to improve their efficiency and motivation. For example, if a company develops effective compensation plans, it can result in favor of the company because employees like to work for a company which values their performances and provides them with the compensation and rewards that they deserve. However, development of compensation plans is directly related on the available budget of a company. If a company will have enough budgets for developing and implementing such plans, only then compensation plans can be developed which will ultimately result in motivating employees and improving their individual and group performances. 2.5 Evaluation In construction industry, evaluation of financial and other business processes plays a very important role. Budget represents the target performance which managers measure with the actual