Purpose of this is so that each department head can

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
purpose of this is so that each department head can accurately determine what may be needed in the following year. They would all create a preliminary budget for their respective department which is then combined with all the other departments. The final budget would then be approved by the head manager and initiated for that period. It is important that the budget is created by a team, but the final budget is approved by the team leader. This way all departments may be evaluated in an unbiased light and a proper budget can be set. If the budget were left to be created by each department, they would most likely create a budget that would favor their operations. If a business fails to produce a proper budget, it could damage them in an irreparable way. For one, if a poor budget is created where all departments are given an allowance of more than they need, it could lead to unnecessary spending, which in turn will affect the net profit of the company. Also, if the budget created is too tight and allows no flexibility for the operations, the business becomes very limited in what they can do. Their potential in earning the most they can becomes hindered and they can lose out on profits. Budgeting for a business is a very delicate balancing act that requires multiple revisions. Without proper analysis of the past and accurate predictions of the past, the budget can end up causing more harm to the business than good. Involvement from all managers is important as well as being able to create a budget that is fair and balanced. And while keeping that in mind, the budget should also be made in a way that it can give the departments an adequate amount of funds to operate while still keeping the expenses as low as possible. References Vitez, O. (n.d.). Why is it Important for a Business to Budget? Small Business Chronicle. Retrieved from http://smallbusiness.chron.com/important-business-budget-385.html
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern