A budget is a forecast of future financial expectations. A cash budget specifically forecasts a company's future cash position. It is produced for internal use, while a cash flow statement looks at past financial events for external use. Budgets are used for monitoring performance, setting targets, delegating responsibility, and gaining information. They allow management to plan, organize resources, make informed decisions, coordinate departments, control performance, and motivate employees.

1. Budgets Higher/Int 2 Business Management 2009-2010

2. What is a Budget? A Budget is a statement of future expectations . Budgets are usually financial in nature although they can be expressed in other units e.g. labour hours. A Cash Budget is a very common type of budget and can be used as an example of how budgets work.

3. Don’t Get Confused! A Cash Budget is produced for internal use within an organisation . It is a forecast of future events . A Cash Flow Statement is produced for external use based on past events .

4. Why Budget? The main uses of budgets are: Monitoring and Control - setting the budget then making comparisons with actual performance. Gain Information - lets managers see how well the business is performing. Set Targets - giving managers and employees limits to reach. Delegate Authority - the use of budgets allows managers to give responsibility to employees.

5. Cash Budgets The information contained in a Cash Budget represents estimated figures of the cash position of an organisation at a particular point in time .

6. Uses of Cash Budgets Monitoring the cash position of a particular department . As a decision-making tool to assess the validity of a particular project or scenario. As part of a submission to a lender to secure finance . Using a spreadsheet , changes can be made to the budget and the effects of these changes will automatically be updated in the rest of the budget.

7. Management Benefits The main benefits to management of using cash budgets are: Planning Organisation Command Co-ordinate Control Delegation Motivation

8. Benefit - Planning Management can look ahead to set aims and strategies . This allows problem-solving to be planned rather than having to react to situations as they happen. As an example , plan for when an additional loan or overdraft is required .

9. Benefit - Organisation Budgets allow management to ensure that the right resources are in the right place at the right time . Management must ensure that it can afford the resources that they require and are able to take advantage of any discounts available from suppliers.

10. Benefit - Command When management are able to make informed decisions , enabling them to instruct their subordinates . Each departmental manager must also know the department’s limits for requesting additional finance .

11. Benefit - Co-ordinate Management can give instructions to those in charge of departmental budgets and keep a clear overview of the business as a whole. Making sure that everyone is working towards the same goals .

12. Benefit - Control Evaluation of budgets, comparing the results with what was planned . Using Cash Budgets as a measure of performance gives management a tool that records quantifiable data in order to compare different department or branch performances .

13. Benefit - Delegation Management should make subordinates responsible for a suitable range of tasks and give them the authority to carry them out.

14. Benefit - Motivation Management have a responsibility to motivate their staff . This can be done by setting realistic targets in the budgets and introducing concepts such as teamwork , empowerment , and incentives for meeting targets or operating within the budget .