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Purpose of this is so that each department head can

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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
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