After reading this chapter, you should be able to answer the following questions:
What are the benefits of budgeting?
What types of budgets are used within organizations?
What are the main steps in the budgeting process?
How does the budgeting process for a manufacturing organization differ from the budgeting process for a service organization or a retail organization?
Why is it important to develop a cash budget?
What are the challenges faced when budgeting, and how can these challenges be overcome?
Anthony and Govindarajan (2000) described budgets as “an important tool for effective short-term planning and control” (p. 360). They saw strategic planning (see Chapter 6) as being focused on several years, contrasted to budgeting which focuses on a single year. Strategic planning “precedes budgeting and provides the framework within which the annual ...