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Budgeting as a Management Tool in Jools Furniture Essay Example

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Budgeting as a Management Tool in Jools Furniture

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Budgeting as a Management Tool in Jools Furniture. According to the research findings, it can, therefore, be said that budgeting is the process by which targets are set for goal attainment. It is described generally as the key to financial management and is used to monitor and control performance of various departments in the organisation. The functions of budgeting are numerous. BPP (1998) lists the functions of budgeting as:

ensure the achievement of the organisation’s objectives
compel planning
communicate ideas and plans
coordinate activities
provide a framework for responsibility accounting
establish a system of control
motivate employees to improve their performance

A master budget is very useful in linking the various departments in an organisation to organisational goals.

Horngren states: “The master budget summarises the financial projections of all the organisation’s budgets and plans. It expresses management’s comprehensive operating and financial plans – the formalised outline of the organisation’s financial objectives and their means of attainment. Budgets are tools that by themselves are neither good nor bad. How managers administer budgets is the key to their value. When administered wisely, budgets compel management planning, provide definite expectations that are an appropriate framework for judging subsequent performance, and promote communication and coordination among the various subunits of the organisation.” There are many different styles of budgeting as there are different styles of management. They include activity-based budgeting, zero-based budgeting, and Kaizen budgeting. Just to name a few. Zero-Based Budgeting (ZBB) starts from the premise that no costs or activities should be included in the plans for the coming budget period, for the sole reason that they were included in the costs or activities for the current or previous periods. Instead, everything that is to be included in the budget needs to be carefully considered and justified. Budgeting as a Management Tool in Jools Furniture.

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