Abstract
Nowadays, companies try to optimize their profitability through the efficient and economical use of resources and labor, for do it they need financial road maps to show how they will allocate their resources in order to achieve their business objectives. In other words, companies need to establish a budget. A budget is a description of a financial plan; it describes a period in the future not in the past. The long term planning involves setting objectives and defining and selecting strategies which will enable a business to achieve those objectives.
Budgeting is a very important part of this process and can be defined as stating formally, in quantitative terms, what the business plans to achieve in the immediate future (S.Kenp and E. Dumbar; 2003). Budgeting has two primary functions: planning and control. Using budgets as a control mechanism represent benefits for the company. Indeed, to start the budgetary control aims to maximize the profit of the company (R.Banham; 2000). In order to achieve this goal, it is necessary to undertake a co-ordination of different functions and a good planning. If there is a proper control over different revenue and capital expenditures; the resources will be put to the best possible use.
Moreover, the budgeting control improves the co-ordination within the company (A. Wildavsky; 2003). In fact, the working of the various departments and sectors is well co-ordinate and the budgets of different departments have a bearing on one another. So, the co-ordination of various executives as well as subordinates is necessary for achieving budgeted targets. Thanks to the budget control all efforts are put jointly to achieve the common objective of the organization.
