Reference no: EM13499985

Forecasting & Budgeting

Forecasting is predicting the outcome of events. It is an essential starting point for budgeting. Budgeting is planning for a result and controlling to accomplish that result. Budgeting is a tool, and its success depends on the effectiveness with which staff use it(Shim,Shim& Siegel 2012). Forecasting can be looked at as just looking ahead to the outcome of upcoming events, while budgeting on the other hand is planning ahead one has more control over the results when budgeting is done.

Operating & Cash Budget.

An operating budget deals with the costs for merchandise or services produced. It covers income statement items comprised of revenues and expenses. A cash budget is for planning and control. It presents expected cash inflow and outflow for a designated time period. The cash budget helps management keep cash balances in reasonable relationship to its needs and aids in avoiding idle cash and possible cash shortages. The cash budget typically consists of four major sections:receipts, disbursement, cash, and financing sections.

Zero-Based Budgeting

Is a priority form of budgeting, ranking activities such as products and services. It can be used by financial managers to identify,plan, and control projects and programs. It enhances effectiveness and efficiency and matches service levels to available resources. It can lower production, service, and operating costs. This type of budgeting can improve efficiency of an organization because justification is needed in order to fund a project.

Ref:

Shim,Shim and Siegel-2012