Procurement describes the acquisition of goods or services at the best possible cost, in the right amount, in time and place, for the direct benefit of the business. The question now arises: how should we prioritize it if you have only a limited amount of money? There is the role of the budget.
Budget is the quantitative expression of financial plans. How useful are budgets? Budgeting prompts leadership to systematically think about the future. They also serve as a tool to coordinate the complex operation of the business and provide a means to communicate the company's financial goals.
To be useful, the budget must be set for a specified time. Generally, the budget is for one year. The company's operating budget may include programs or areas of responsibility. The program budget is developed for products that are considered as major business activities. This budget presents the expected costs and benefits of different products and services.
The cost center is responsible for tracking costs and costs. To measure your performance, we compare your actual costs with your budget budget. The latter represent the costs incurred by taking into account the actual level of activity. The difference between actual costs and planned costs is analyzed for control purposes
What is the basis for preparing the budget? The most frequently used base is the level of operations for the current year. Use this to identify the expected and planned changes for the coming year to shape the budget of the given year. In this approach, which is referred to as a gradual approach to the budget, budgeting focuses on operations during the budget period.
Every business has a critical factor that limits its level of activity. Expected demand often is the limiting factor that determines the scope and level of operations. When demand is fairly strong, the company's production capacity may be a limiting factor, which can not be expanded in the short term. For companies that do not have easy access to the capital market, financial matters can be a limiting factor