We explain what the budget is and why this document is so important. Its classification and what is a budget follow-up.
What is a budget?
The budget is a document that provides for the cats and profits of a particular agency , company or entity, whether private or state, within a certain period of time.
Official budgets must meet four requirements, on the one hand the preparation, then must be approved by the corresponding body , is executed and finally there must be a control. When it comes to state budgets they are regulated by law .
The central objectives of the budgets is to carry out controls on purchases, sales and quantify income and money expenses . They also have the purpose of preventing and correcting errors and finally perform the financial controls of the entity.
Why is the budget important?
Some of the reasons why budgets are important are, for example, planning operations and later continuing with this planning . They are also useful when measuring risk and reducing it. They allow in turn to review the tactics and policies taken by the organizations.
Types of budgets
On the other hand, budgets can be classified in different ways according to criteria such as the time they cover, these can be short or long-term planning . The latter are used by large companies and by the states .
On the other hand they can be flexible or rigid , the latter do not allow modifications despite changes that may occur in reality . They can also be classified according to the sector of the entity in which it will be applied.
Once a budget has been made and executed, it is convenient to carry out an exhaustive follow-up as time progresses , and the actual data of what was budgeted is known. On the other hand it is very useful to record possible movements of capital that had not been initially contemplated.
It is also advisable to keep people working in this field up to date . It is also suggested to make reports on budgets for all people and areas required by the organization . The goal is to keep them up to date with real data as time progresses in budgets.