In this assignment I will talk about why costs and budgets need to be controlled and the advantages and disadvantages of controlling costs and budgets. I will also explain what can happen to a business if costs and budgets are unmonitored.

Authors Avatar

Investigating Business Resources

Introduction:

In this assignment I will talk about why costs and budgets need to be controlled and the advantages and disadvantages of controlling costs and budgets. I will also explain what can happen to a business if costs and budgets are unmonitored.

Importance of costs and budgets controlling:

It is very important for an organisation to control its costs so that it can manage its financial resources effectively. The reason organisation needs to control their costs properly would be that it would end up saving money on expenses and increase its revenue. This will help the company to increase its revenues and this would allow the company to invest more money if required. For example, the business should control its costs so that it saves money and by having the right amount of stock the business can then have the full benefits of selling those stocks and receiving cash which could be used for other areas of the business.

 In a business organisation, a budget represents an estimate of future costs and budgets. Budgets may be divided into two basic classes: Capital Budgets and Operating Budgets.

Capital budgets are directed towards proposed expenditures for new projects and often require special financing. The operating budgets are directed towards achieving short-term operational goals of the organisation, for instance, production or profit goals in a business firm.

Join now!

It is crucial for a business to control its budget. Budgets help the business to determine whether they have enough money to raise the business or generate more profit. It is also important for an organisation to control its budget so that it has finances for the period of the budget. The budget will help the business to reach its targets and goals. A positive controlled budget helps businesses to manage their financial resources effectively.

It is very important for the business to manage their costs because an uncontrolled budget can decrease the profit. If a business doesn’t ...

This is a preview of the whole essay

Here's what a teacher thought of this essay

Avatar

Too much is expected of budgeting in this essay. Businesses use them as guides to help plan and they analyse the variances (where the budget is wrong) to ensure that nothing too untoward is happening and see if corrective action is required. This aspect of budgeting has I feel been overlooked