Budget for planning, decision making and control

A budget is a financial plan for the year ahead

Advantages of budgeting:

• planning
• communication/co ordination
• authorisation
• motivation

Useful comparisons:

• Year on year trends
• month vs same month last year for seasonal changes
• year to date figures
• rolling average from previous 3 months

Limiting factor: the constraint that will limit the business’s growth in the following year eg. level of sales often determines how a business can plan operations

Master budget: overall business budget

Functional budget: department budget

incremental budget: taking the previous year’s figures and adjusting due to inflation etc.