Budgeting System

Answer: (sicabalan, booth, malmi 2009, city bank Indonesia)

Introduction:

Budgeting system is an important element of financial results control systems. This system does not only shows where the organization wishes to go, but also how it intends to get there, and what results should be expected. The processes of budgeting force people to think about the future, to prepare their ideas and plans carefully.

The purposes of using budgeting system can be classified into four main categories, including planning, coordination, facilitating top management oversight and motivation. The following of this essay will mainly focus on the influence of budget and budgeting on employees, management and performance of an organization.

Body:

Budget provides the step by step guidance for managers to use the scarce resources to achieve the organization’s objectives. It is usually stated in monetary terms and periodically, actual financial performance is compared to budget and variances are analyzed and explained. Nowadays, managers use budgeting system in the organization with the purposes of making plan for the companies, motivating employees, increasing the coordination in the organization, and strengthening the long-term competition position of the companies.

First of all, budgeting is decision-making in advance. It provides the needed encouragement. Budgeting system serves as a powerful form of action control that forces managers to think about the future and to make decisions in advance. In doing the forward thinking, the managers come to understand better the company’s market opportunities and threats, its strengths and weaknesses, and the effects of possible strategic and operational decisions. At the same time, this future-oriented thinking and decision-making process sharpens the organization’s responses and reduces