What is it budgets?

What is it budgets?

1. It is a plan of operations and resources of a company, which is formulated to achieve the proposed objectives over a certain period and is expressed in monetary terms. In other words, making a budget is simply sitting down to plan what you want to do in the future and point it out in money.

2. is a tool that allows you to know what your income and expenses are in a given time, to know how much you can allocate to saving for the fulfillment of your stated goals, to identify what you are spending your money on, how much you need to cover your needs, to determine what you are spending too much and take action when you need to cut expenses.

3. Functions

   • Control of expenses: A comparative record of the current expenses with the previous ones and the allowed results allows to correct errors and confirm achievements
     • Minimize risks: Anticipating income and expenses avoids making investments too large for predictably limited results.
       • Planning :Developing action plans effectively is only possible if it is known in advance that there are the necessary resources to carry it out in full.
         • Types of budgets
           • Static budget: It is a fixed budget, which assumes that the estimates of the future situation will be correct. It is only possible if there is a stable economic context with respect to all the factors that will intervene in the plan
             • features
               • 1.Create income awareness
                 • 2.Emphasize expenses, their amount and justification
                   • 3.Reorient spending, saving and investment habits
                     • 4.set financial goals
                       • why it is important budgets?
                         • -Facilitate efficiency and control within the operation
                           • -It requires cooperation between all departments of the company, motivating management to focus on defining the objectives
                             • -Promotes standardization and control in the flow of information Reduce uncertainty
                               • -It means a challenge of continuous improvement for executives within the company
           • Flexible budget: They are prepared to adapt to changes in the economic context. They are the most common because they are the only ones capable of responding to changing circumstances but, at the same time, they are more complicated and expensive since they take into account multiple variables.
         • To fulfill this important function, we must to consider:
           • THE DEFICIT:Situation in which the expenses incurred by an individual, exceed the non-financial income, in a certain period (usually one year
           • THE SURPLUS: It is what exceeds the credit after all obligations are satisfied. The difference in income over expenses.
           • This are important, since present the reality of what happens in economic activity.