Budget - Why Do We Produce Budgets?

Why Do We Produce Budgets?

Budget helps to aid the planning of actual operations by forcing managers to consider how the conditions might change and what steps should be taken now and by encouraging managers to consider problems before they arise. It also helps co-ordinate the activities of the organization by compelling managers to examine relationships between their own operation and those of other departments. Other essentials of budget include:

• To control resources
• To communicate plans to various responsibility center managers.
• To motivate managers to strive to achieve budget goals.
• To evaluate the performance of managers
• To provide visibility into the company's performance