Financial managers will have to come up with resources and labor to help their company become profitable. They will also need to have a plan for budgeting so that the company will be able to accomplish their goals. Budgeting will allow companies to control and allocate expenses with the resources they have to maximize profits. Financial managers will have to assist the company with money to be invested, how many employees to hire and a marketing strategy. Long-term and short-term plans should be made for budgeting so that the budget will help implement strategies and conduct performance evaluations. In the planning cycle there are five steps that a company should use to help with budgeting plans each year. First, a strategic plan should be made to focus on goals that are long-term how it will be achieved. The long-term goals are usually made for a 5 year period. Second, the company will plan for an annual operating plan that will show what will be happening over the year. This plan will be very specific and is referred to as a budget.
Third, the company will revise their plan, since things can change after the year starts. The plan will need to be adjusted to achieve their goals. Fourth, the company will make forecasts throughout the year. The company may predict their sales half way through the year. Fifth, is when the” company will produce the business plan in which they apply for venture capital and other investments” (Heil, 2015) As technology improves capital expenditures budges outline big investment goals for a 5-10 year period. Companies will rely on capital budgeting to plan and evaluate the short term assets into long term assets. With budgeting the management can then determine what the best way to make the company the most profitable using little resources. When used wisely, management will be able to effectively deploy resources and introduce modifications to the plan.
Heil, K. (n.d.). BUDGETING. Retrieved July 17, 2015, from http://www.referenceforbusiness.com/encyclopedia/Bre-Cap/Budgeting.html