21. Budgeting and Budgetary Control
Budgeting is a core practice in organizations, focusing on planning, coordinating resources, and evaluating performance. It encompasses various types and processes to ensure effective financial management, especially in technology-driven industries. Understanding budgeting is crucial for engineers in managerial roles to align technical endeavors with financial objectives.
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What we have learnt
- Budgeting serves as a financial roadmap for organizations, detailing revenue and expenditure forecasts.
- Effective budgetary control involves monitoring and comparing actual performance against planned budgets to identify variances and take corrective actions.
- Zero-Based Budgeting (ZBB) requires justifying all expenses anew for each budgeting cycle, enhancing cost efficiency.
Key Concepts
- -- Budget
- A quantitative plan estimating an organization's revenues and expenditures over a specific future period.
- -- Budgeting
- The process of preparing budgets, planning future income and expenditures, and allocating resources accordingly.
- -- Budgetary Control
- The use of budgets to monitor and control organizational operations, comparing actual performance with budgeted targets.
- -- ZeroBased Budgeting (ZBB)
- A budgeting approach starting from zero where each activity must be justified for a new budgeting cycle.
- -- Performance Budgeting
- A method that links resource allocation to results delivered, ensuring a focus on outcomes.
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