COMMUNICATION

In the budgeting process, managers in every department justify the resourcesthey need to achieve their goals. They explain to their superiors the scope and volume of their activities as well as how their tasks will be performed. The communication between superiors and subordinates helps affirm their mutual commitment to company goals. In addition, different departments and units must communicate with each other during the budget process to coordinate their plans and efforts. For example, the MIS department and the marketing department have to agree on how to coordinate their efforts about the need for services and the resources required.

COORDINATION

Different units in the company must also coordinate the many different tasks they perform. For example, the number and types of products to be marketed must be coordinated with the purchasing and manufacturing departments to ensure goods are available. Equipment may have to be purchased and installed. Advertising promotions may need to be planned and implemented. And all tasks have to be performed at the appropriate times.

PLANNING

A budget is ultimately the plan for the operations of an organization for a period of time. Many decisions are involved, and many questions must be answered. Old plans and processes are questioned as well as new plans and processes. Managers decide the most effective ways to perform each task. They ask whether a particular activity should still be performed and, if so, how. Managers ask what resources are available and what additional resources will be needed.

CONTROL

Once a budget is finalized, it is the plan for the operations of the organization. Managers have authority to spend within the budget and responsibility to achieve revenues specified within the budget. Budgets and actual revenues and expenditures are monitored constantly for variations and to determine whether the organization is on target. If performance does not meet the budget, action can be taken immediately to adjust activities. Without constant monitoring, a company does not realize it is not on target until it is too late to make adjustments.

EVALUATION

One way to evaluate a manager is to compare the budget with actual performance.Did the manager reach the target revenue within the constraints ofthe targeted expenditures? Of course, other factors, such as market and generaleconomic conditions, affect a manager’s performance. Whether a manager achieves targeted goals is an important part of managerial responsibility.