Introduction:

Budgeting can be termed as estimation of Revenue and Expenses that can happen in a future .

In a simple words it is known as a financial plan ,that helps an organisation to maintain there future Revenue and Expenses. It is mainly formed for a specific period or for a specific project.

Importance of Budgeting for an organisation :-

• Long term decisions - Budgeting helps an organisation to take long term decision in the most efficient way because long term decisions are concerned high-value and companies worth totally depends upon the long-term decisions ,so it is better to make a proper budget for taking the long-term decision that helps any company generate more profit and growth .

Example- the company thinking to purchase the machinery of dollar twenty lakh but after budgeting company didn't find themselves to be in an appropriate situation for buying the machinery of such huge amount . If company purchase that machinery it will drag the company into the huge debts that are unpayable.

• Dynamic environment - Budgeting helps an organisation to deal in such dynamic environment . Because no one knows what happen next, so budget helps an organisation in the pre planning and framing ,so that if an organisation can face any hazardous situation that occurs due to the dynamic environment, then it can cope up easily.

Example -The competitors of the company launch the new product in the market that give a positive response to them. Due to this big companies financial position is badly affected but the company is able to tackle the situation because of its proficient budgeting.

• Objective - Budgeting helps an organisation for setting up the objective because due to budget a organisation can figure out at which place they have to work more to generate more profit and for more growth how they have to maintain things. All this thanks to the proper budgeting.

Example- In an organisation sales department is focusing on more sale on the other hand purchase department is focusing on more purchase but after the budgeting the company figured out they are doing more expenses towards the purchase and generating low income from the sale through this the company get to know how and where they have to deal.

Tool to Control Cost :-

Budget helps an organisation to get an accurate and proficient basics for cost control. It helps to determine the actual cost of the project in contrast to the predetermined budget and it helps an organisation to set that plan is good or bad for their organisation.

Ifthe actual cost of the project moves out of the budget the company can definitely make a step back from the project and if the project have higher chances to generate more profit in the future the company then go with the project without any issue and this all due to the proper and accurate budgeting that occurs in an organisation.

Conclusion :-

So it is concluded that budgeting plays an important aspect in any organisation and have the main role in the growth of profit generation of an organisation. Without the proper budgeting an organisation is not able to do its operation properly, due to of lack of pre determined budget and framing.