Name: Video 1 - Benefits and Limitations
Uploaded: 2017-09-19T00:49:04.282Z
Duration: 4 min 49 s

Fundação Instituto de Administração

Budgeting essentials and development

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The Budgeting Essentials and Development course focus on an integrative and practical view of concepts, methods, and techniques to develop a budget. After finishing this course, learners will be able to: - Develop the budget with a broad view of the corporate functions; - Integrate the strategic guidelines into the discussions of budgeting process; - Structure the budget planning and development in a logical sequence - Coordinate the project of budget planning with the different areas of the company - Actively promote assumptions discussions to improve the process of developing the budget - Apply financial concepts to support the budget planning process - Design a budget monitoring and control model to support the performance management - Evaluate the performance of the company by managing the results and the budget In this course, learners will have a deeper understanding of the budgeting process, its challenges, common issues, and approaches to mitigate the problems and improve the learning curve of budget planning. It is integrative by emphasizing the transition between the corporate strategy and the budget. It is practical by following a structured process of going through a framework that illustrates and demonstrates how to analyze, develop and control the budget.

From the lesson

Module 1: Strategy & Budgeting - Planning & Controlling

As the budgeting process needs strategic guidelines, and these guidelines drive the planning process, corporate managers develop the budget plan accordingly to the strategic guidelines.The budget contributes to the roll-out of programs, projects, and actions to implement in the organization. These programs and projects are planned in the budget development process. In this module of the course, the discussions aim to overview the transition between strategy to the budget planning process. The course is targeted to professionals who actively participate in the budgeting process, e.g., professionals who have been recently promoted to a managing position, in which the scope of responsibilities are broader, especially in the budget planning, monitoring, and control. Pre-requisites to benefit the most from this course is basic to intermediate business management knowledge and concepts.

Video 1 - Benefits and Limitations4:49

Meet the Instructors

Alberto Sansiviero Jr.
MBA
FIA Futures Studies Program
Samantha Mazzero
MSc, MBA, BS Math
FIA Profuturo – Futures Studies Program
Nelson Yoshida
Ph.D., MBA, B.Eng.
FIA Profuturo – Futures Studies Program
Roberto Dumas Damas
M.Sc., CFA
FIA Profuturo - Futures Studies Program
Fernando Fleury
Ph.D.
FIA Profuturo - Futures Studies Program

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Hi there.

Nice to see you here.

In this lesson, I will introduce the main benefits and limitations of budgeting.

As you already know, budgeting plays a key role in effective use of resource and

achieving all of their organization goals.

Organization decides how they should act in certain environments.

What distinguishes them is the testing and

anticipation of the decision making process.

The budgeting planning process consists of deciding in advance what needs to be done

in the next period, to succeed and achieve the goals in effective way.

You, as one responsible about the development, must be prepared to support

the approvement of the product, service, business [INAUDIBLE] during the process.

The budgeting process in organization develops as an attitude of expenditure,

consciousness, stimulate an efficient use of resources and

create an environment of profit-mindedness throughout organization.

It emphasizes how much should be spent to achieve the goal.

For management, budgeting how to generate a sense of care and

caution and they make of the managers before decisions.

But what would be the advantage in deciding in advance?

To answer this question, we listed some benefits.

The process brings more transparency between areas.

Propitious the coordination of areas' activities to pursue the goals

allows early decisions which favored a better location of the resources.

Develops employees' commitment, defines responsibility and

it allows the accountability.

Promotes efficiency.

Support the performance evaluation.

Predict the financial indicators such as profitability, cash flow,

cash allocation and cost reduction.

And improve the company's assumptions review.

On the other hand,

budgeting has certain limitation which require careful consideration.

The utility end success of budgeting depends on the cooperation and

participation of all manage members.

All involved to direct the efforts according to the plan,

many times budget has failed due to the manage lack of commitment.

Budget is only a tool.

It should be used by management for accomplishing their functions.

Sometimes manage fail to understand that budget is meant to provide detail

information, goals and targets which may help them in

resource allocation decisions and achieving the company's objectives.

Sometimes organizations expect too much from the budget.

And in the case of the expectation not fulfilled, the culprit is the budget.

But do not forget, it's only a tool.

All involved in the budget process are responsible for its results.

Do not expect an unfailing budget plan.

This is not exact science.

It's just approximations and judgement which may not be 100% accurate.

At best, a budget is an estimate.

And no one knows for sure, what could happen in the future.

Budget include also spend a significant time and energy from management.

Sometimes the reason for that, is the fact that the poor-organized structures,

face difficulty in coordinating and

aligned interactions, interdependence, and the spaces between areas.

On the other hand, organizations with high amount of data available

managers stand to spend too much time discussing information and

manipulate inadequate tool sets to deliver forecast and budgets objectives.

Do not fall in this trap.

After budgeting planning, some decision make could become inflexible.

It could happen because the management tends to focus on a particular period and

there isn't formal review during the rest of the year,

where the company could have a chance to check the environmental changes,

versus companies perform an align budget objectives.

Last but not least is about the quantitative nature of budgeting use

to lead management to focus almost exclusive in some aspects of business such

as improving our maintaining profitability and other financial outcomes.

Did you like this lesson?

It's time to go farther.

Go to the reading to take the most of this content.

See you soon.

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