Budget DQ1a. "I Don't Need Thesis

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Looking over a spreadsheet can clarify when to make larger purchases, such as waiting until the start of a new billing cycle, or negotiating better payment terms offered by suppliers and any creditors, especially when interest rates are volatile.

Once the need for a budget is established then the organization can consider what type of budget it desires. For example, with zero-based budgeting, "all expenses must be justified for each new period. Every function within an organization is analyzed for its needs and costs. Budgets are then built around what is needed for the upcoming period, regardless of whether the budget is higher or lower than the previous one" (Zero-based budgeting, 2009, Investopedia). While it is true that zero-based budgeting is more costly than traditional cost-based budgeting, it also favors enterprises specializing in areas "that achieve direct revenues or production" in the enterprise (Zero-based budgeting, 2009, Investopedia). For larger organizations, this method permits strategic goals to be factored into budgeting process by tying them to specific functions of the organization. Another type of budgeting that is non-traditional is activity-based budgeting, where managers examine the processes and the costs of those processes. "Cost efficiencies can be found by comparing activities performed in different areas of the organization and consolidating or rerouting certain functions" (Activity-based budgeting, 2009, Investopedia).

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Budgeting has never been easier, given the availability of software programs that assist in the process. Additionally, should any discrepancies occur on the balance sheets, having a regular method of budgeting of expenses can help unravel financial questions about the results. Around income tax time, an orderly budget makes accounting far easier. A clear budget makes it easier to record business-related expenses and make deductions -- and makes it easier for the accountant if a business is audited or needs to show compliance with regulations. If a business must apply for a loan, proving solvency and demonstrating a strong showing of past growth and revenue are easier using past budgetary records which can be shown to the bank.

Although having a budget is time-consuming, and may incur some costs, as in employing an accountant or using business software and hiring staff to 'crunch the numbers' on the software, the long-term savings can be incalculable. Profit-making functions can be identified, unforeseen drains on the enterprise are flagged, and the business can be more flexible with changes in the environment, whether there is an upswing or a downswing in customer demand, a change in input costs, or changes in regulations regarding accounting or other business practices.

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