StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Difference between Budgeting and Forecasting - Essay Example

Cite this document
Summary
This essay "Difference between Budgeting and Forecasting" discusses budgeting and forecasting that are both used for estimating income and expenses, the difference is the objective. Budgeting allows you to control your expenses by tracking where it is spent (Investopedia, n.d.)…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER94.3% of users find it useful
Difference between Budgeting and Forecasting
Read Text Preview

Extract of sample "Difference between Budgeting and Forecasting"

Forecasting makes use of past and present data, and trend analysis to estimate sales, or to estimate demands for a product. It uses statistical data in estimation and uses management expertise, knowledge, and judgment (GeminiGeek, n.d. )

  1. What is the difference between an operating budget and a cash budget?

An operating budget is a projection of estimated income and expenses that are based on the forecasted sales which are usually done for a short-term period, normally for one year while a cash budget is a way of monitoring the cash flow of a business.  A cash budget makes it easy to see how much money comes in and out for the period, thus, it becomes a simple way to monitor the financial condition of the business or household. A cash budget can be done either on a weekly or monthly period for accurate monitoring (Business Directory, n.d.) 

3. Explain what zero-based budgeting is and how it can improve the efficiency of the company?

Zero budgeting departs from the traditional budgeting wherein all expenses must be justified for every new budgeting period and every function within the organization is analyzed.  Zero budgeting starts from zero and does not take into account the prior year’s budget (Cronin, Tom). For instance, if you have a budget of $20,000 for a campaign in 2011 and it did not produce a good result, the manager must justify why he needs the same budget for 2012.  The manager must develop a plan from zero-base and justify why, where, and how he will spend the money of the company.  In other words, if the manager proposes a campaign for a product, he would pinpoint the projected expenses and profit to show its feasibility so that the company could assign a particular budget for that.  All budget proposals are then analyzed and ranked according to importance.  The system lets the management identify priorities, allows management to compare and analyze the needs of every unit in the organization, and makes funding allocation. In zero-based, budgets are built around what is needed for the coming period, regardless of whether the budget is higher or lower than the previous ones. It does away with the practice of “careless spending” usually found in traditional budgeting that only rolls around the budget. Zero-based evaluates the performance of each activity

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Budgeting Essay Example | Topics and Well Written Essays - 250 words”, n.d.)
Retrieved from https://studentshare.org/management/1592642-budgeting
(Budgeting Essay Example | Topics and Well Written Essays - 250 Words)
https://studentshare.org/management/1592642-budgeting.
“Budgeting Essay Example | Topics and Well Written Essays - 250 Words”, n.d. https://studentshare.org/management/1592642-budgeting.
  • Cited: 0 times

CHECK THESE SAMPLES OF Difference between Budgeting and Forecasting

Summary to Beyond Budgeting and the Adaptive Organization

This dissertation "Summary to Beyond budgeting and the Adaptive Organization" discusses budgeting that has been considered as the cornerstone of the management accounting system.... However, with the passage of time, there have been several discrepancies and inconsistencies found in the budgeting process and traditional methods used by managers for budgeting and this has raised questions regarding the reliability and effectiveness of the budgeting process (Ostergren and Stensaker, 2011)....
62 Pages (15500 words) Dissertation

Budgeting in a Business

“Budgetary Control is planned to assist the management for policy formulation, planning, controlling and coordinating the general objectives of budgetary control” (Chapter 27: budgeting and Budgetary Control n.... budgeting plays an important role in a business.... budgeting Introduction:budgeting plays an important role in a business.... “budgeting can help a company use its limited financial and human resources in a manner which best exploit existing business opportunities” (budgeting 2013)....
3 Pages (750 words) Essay

Economic Forecasting

t is startling that the need for faster delivery of advanced forecasts and budgets has not received more consideration more so in light of the time and drive toward a faster close Most budgeting and forecasting processes and systemsrequireacceptablechanges to accommodate thereorganizations, mergers, acquisition, and divestitures that have become the characteristic of modern businesses.... Annualbudgeting and forecasting cannot keep pace with today's vibrant business situation because the information produced is irrelevant andoutdated....
4 Pages (1000 words) Research Paper

Principl Fetures of Budgeting as a Plnning and Control System

The most importаnt difference between the two is in the wаy they influence the bаnk's decision-mаking processes.... Current pаper provides a discussion of budgeting in the context of a plаnning аnd controlling system of аn orgаnizаtion.... budgeting is а key component in the mаnаgement process.... In budgeting, such criticаl issues аre predetermined, either аs finаlized decisions or аs аssumptions.... Centrаl to budgeting is the tаsk of forecаsting levels of loаns, deposits, аnd revenue....
9 Pages (2250 words) Term Paper

Beyond Budgeting in International Hospitality Industry

To complete such development, a change of accounting system must also be considered, most of which is to get rid Traditional budgeting is no longer valid in the emerging information age that is why hospitality industry needs to move ‘beyond budgeting.... This suggestion is supported by empirical investigation of hospitality budgeting mostly in the United Kingdom and United States.... It is believed that Beyond budgeting fits the progressive N-form organizational structure wherein full potential of the organization and the people are being liberated....
8 Pages (2000 words) Essay

Budgeting as a Planning and Control System

The basic motive of this report "budgeting аs а Plаnning аnd Control System" is to provide information about the principal features of budgeting.... Аll this functions аre cаrried out through budgeting.... Current pаper provides discussion of budgeting in the context of plаnning аnd controlling system of аn orgаnizаtion.... Understаnding whаt а budget is аnd the role budgeting plаys is essentiаl to the proper exercise of а mаnаgers responsibilities, which include plаnning, orgаnizing аnd stаffing, directing or leаding, аnd controlling....
9 Pages (2250 words) Report

Financial Management in Nonprofit Organizitions

The comparison was done based on different components of financial management including ownership/governance, mechanism, purpose, and funding; cost of capital estimation, capital structure decisions, capital budgeting decisions, and financial analysis, planning, and forecasting.... The paper 'Financial Management in Nonprofit Organizations' is a cogent example of a finance & accounting literature review....
6 Pages (1500 words) Literature review

Financial Planning and Budgeting - Lighthouse Ltd

The financial models can help in answering other questions that manual calculations do ignore and help in making the appropriate decisions for forecasting.... The paper "Financial Planning and budgeting - Lighthouse Ltd" is a perfect example of a finance and accounting case study.... This is financial planning and budgeting for Lighthouse Ltd.... The paper "Financial Planning and budgeting - Lighthouse Ltd" is a perfect example of a finance and accounting case study....
16 Pages (4000 words) Case Study
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us