AIU Finance Navigating the Challenges of Budgeting in Business Essay

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Assignment Details

Many companies face budgetary challenges on a continual basis. Two critical aspects that businesses lack when budgeting are effective control practices and monitoring. 

Budgeting is essential to businesses, but it is not that simple to implement: 

• What are some challenges and weaknesses that a firm may find in the budgeting process? 
• What are some examples of effective monitoring and control practices, and how do they help address budgetary challenges? 
• Discuss the role of the budgeting committee and its responsibilities 

In your replies to others, share your experiences of budgetary challenges that you may have encountered in a business. 

Nicole Carson

n this week’s discussion post we were asked what are some common challenges during the budgeting process? Creating and sustain a budget that can help create a balanced future for the company. another budgeting challenge is trying to keep track of every dime that the company spends and holding firm to the budget plan. Keeping track of what the company plans to spend vs keeping track of what the company actually spends and making adjustments accordingly. Choosing the correct software application to keep track of the budget and training staff on how to use the software and run budget reports. Of all the challenges with regards to budgets is keeping track of what the company actually spends and maintain all of the receipts is a huge challenge because a company has many moving parts and each department requires a different type of budget. There are about seven types of budgets which can also be a challenge for a new company. The incremental budget uses for example 2023 years budget as a bassline which the finance teams will adjust by incremental amounts. So if a company is using a incremental budget is that it accounts for unneeded expenses and does not account for decreases in budgeted items. Budgets can also be counterproductive with regard to innovation most budgets stick to a certain amount and doesn’t leave any wiggle room for new ideas or new projects that may require the company to step outside of the current budgeting parameters. In addition to budgeting challenges there are several steps that a budget control committee are responsible for such as : and established method of recording company income and expenditures, determine a policy for handling variances and determine what percentage of variances are acceptable or not. As well as establishing rules and regulations for variances. 

Daniel Richardson

Hello everyone,

This week we are discussing budgeting practices and some of the challenges they may face and some monitoring and control practices they can use to overcome those challenges. One of the challenges it may face is weak management that doesn’t have realistic goals or are too far off target to be successful. Another could be the fear of failure and not making any decisions at all or being indecisive, or the budget just takes too long to prepare and ends up becoming irrelevant by the time it is ready. This can be countered by setting a timeline and closely monitoring it to make sure it is on track. Once there is a budget a shortfall is not keeping up with the changes in the economy, market, or internally within the company. This one is always on the top of the list for me and it is communication. A lack of communication will lead to the breakdown of the budget and everything else. This can be countered by having plenty of in-person meetings with all the heads of the different departments and then having more meetings with the departments themselves. A lot of times emails and texts can be misunderstood and lead to miscommunication. The last one I have is ignoring budget issues. Procrastination is a big problem in budgeting, managers think that it’s not a big deal and that they can fix the issues later. This can be managed by finding issues quickly through frequent overviews and then acting to fix them quickly. The role of a budget committee is to oversee a company’s allocation of resources. At the beginning of the fiscal year, they generally generate and approve a budget for that year and divide up the resources amongst the different departments. It is responsible for making sure the resources get used in the most effective manner with minimal waste.