What Does Budget Mean
We explain what the budget is and why it is so important. Also, how is it classified and what is a budget tracking.
What is budget?
The budget is a document that foresees the costs and profits of a certain body, company or entity, be it private or state, in a certain period of time .
The official budgets must meet four requirements, on the one hand the preparation, then it must be approved by the corresponding body , it is executed and finally there must be a control. When it comes to state budgets, they are regulated by law .
The central objectives of budgets is to control purchases , sales and quantify income and expenses of money . They also have the purpose of preventing and correcting errors and lastly, they carry out the financial controls of the entity.
See also: Accounting
Why is the budget important?
Some of the reasons why budgets are important are, for example, to plan operations and later continue with this planning . They are also useful when it comes to measuring risk and reducing it. They allow, in turn, to review the tactics and policies taken by the agencies.
Budget types
On the other hand, budgets can be classified in different ways according to criteria such as the time it covers, these can be short-term or long-term planning . The latter are used by large companies and by states .
On the other hand, they can be flexible or rigid , the latter do not allow modifications to be made despite the changes that may occur in reality . They can also be classified according to the sector of the entity in which it will be applied.
Budget tracking
Once a budget has been made and executed, it is convenient to carry out an exhaustive monitoring as time progresses , and the real data of what had been budgeted is known. On the other hand, it is very useful to record possible movements of capital that had not been initially contemplated.
It is also advisable to keep the people who work in this area up to date . It is also suggested to make reports on the budgets for all the people and areas that the organization requires . The goal is to keep them abreast of actual data as time progresses on budgets.