|Type of paper:||Research paper|
|Categories:||Planning Goal Business Budgeting|
Each financial activity that a corporation undergoes has to be decided because the budget that has been planned considers the similar. In most organizations, budgeting is the most significant tool for productivity and for corporations to perform well, resources should be well utilized, and clients well served. To attain such ends, the organizational resources should be well used in the appropriate way and at the right time to develop quality products at minimum expense. Productivity is a summary of the measure of the quality and quantity of work performed when considering the use of resources. It can be gauged at the personal, group, or organizational levels. Productivity might be explained as success in dimensions of staff performance, efficiency, and effectiveness. The corporation has been communal to attain individual and group objectives. They act as the means whereby products and services are offered beyond the borders of an individual or small group's potential for self-sufficiency. This might be crafted for economic motives through some other regulated framework of social or commercial provision. Conversely, budgeting is the most fundamental of all management functions. It entails choosing from the alternative future course of action for the organization as a whole and each department in it. In addition, it necessitates choosing the objectives of the organization and goals of the department, evaluating and offering a sound approach to pre-selected goals. It strongly depicts managerial innovation and the capability to develop something.
The personnel budget highlights the requirements of the workforce in the entire department for the budget period. Also, it clarifies the labor requirements in terms of cost, labor hours, and grade of employees. It enables the personnel managers in offering the required number of employees to the departments either by new appointments or transfers.
A budget is a quantitative expression of a plan for a specified period. It might entail the planned sales volumes, costs and expenses, assets, and liabilities. Nonetheless, it expresses the strategic plans of corporations, departments, events, or activities in measurable terms. Budgets assists in the planning of actual operations by obliging managers to take into account how the conditions might change and the necessary steps to be taken, and motivating managers to consider issues before they happen (Aleks et al., 2018). It assists coordinate the activities of the corporations by compelling managers to assess relationships between their operations and those of the other business units.
The personnel budget of a corporation is always compiled yearly though might not be a finished budget often necessitating considerable effort, is a plan for the short-run future, enables many people in various departments to list their anticipated expenses and revenues in the final budget. If the actual figures provided throughout the budget period close to the budget recommends that the managers grasp their business and have been driving it in the deliberated direction (Abubakar & Stephen, 2018). Conversely, in case the figures diverge significantly from the budget, this sends signal and share price could suffer.
The issue which underscores the necessity to understand the relationship between personnel budgeting, planning, and productivity with interest in budgeting and the sense of urgency brought by contemporary competition, is the danger that budgeting can evolve as an expensive fad, not vary significantly and eventually disillusioning (Abubakar & Stephen, 2018). The above statement implies that not all corporations that have a proper budget reap the desired merits.
Majority of the personnel budgeting failures emanate from the inability of managers to grasp the budget and enforce it well. Issues have been acknowledged in the budgeting process (Abubakar & Stephen, 2018). For example, when establishing objectives, organizations find it problematic to engage the workers who are closely linked to this is the problem linked with the probable environment distinct variables and events.
Personnel budgets are used to plan the future activities of the corporations and strive to guarantee that organizations act well to attain the set goals (Kenno et al., 2020). They constitute information on the number of labour resources needed, which make it possible to plan outflows and inflows of liquidity. When setting a budget, the managers should forecast the future and take into account the issues and changes that might happen (Abubakar & Stephen, 2018). This encourages the managers to take measures before issues happen. The number of ad-hoc decisions is decreased when plans are made in advance.
Personnel budgeting is concerned with the implementation of the long-term plan for the year ahead. Because of the shorter planning horizon budgets are more precise and detailed. Budgets are clear indications of what is expected to be achieved during the budget period, whereas long-term plans represent the broad directions that top management intends to follow. Codesso & Lunkes (2016) argue that the budget reflects the projected plans and aspirations of the future results and behaviours of the plan. The budget process obliges managers to take into account their aims and objectives and specify the appropriate way to attain them (Codesso & Lunkes, 2016). It is essential to differentiate the three distinct forms of planning in the budgeting process.
The critical planning decisions will have been made as part of the long-term planning process. The yearly budgeting process results in the refinement of those plans because the managers are required to produce in-depth plans for the implementation of the strategic plan. The pressures of the daily operating issues might induce the managers not to plan future operations (Codesso & Lunkes, 2016). The budgeting process guarantees that the managers plan for future operations. The budgeting process guarantees that managers plan for the future operations and that they take into account how the condition in the subsequent year might change the measures to take to respond to the conditions (Abubakar & Stephen, 2018). This process motivates the managers to expect issues before they happen, and hasty decisions that are at the moment grounded on the expediency instead of reasoned judgment will be minimized.
Strategic planning deals with preparing the long-run action plans to attain the objectives of the organization. It assists in evaluating the direction to take by establishing the goals and objectives whereby the goals assist in standardizing services and evaluating programs (Kenno et al., 2020). It is a mandate that the budget should align with the strategic plan. Planning tends to link the short-term, intermediate, and long-term goals. The goal of planning is to ensure the best use of the existing resources of the organization over the long-term (Codesso & Lunkes, 2016). Arguably, budgeting forms a segment of the plan. The yearly plan might be grounded on the long-term plan. The yearly budget should align with the long-term goals of the corporation. There should be a climate that is conducive to planning and friendly relationships. Nonetheless, the purpose of planning is to increase the profits garnered by corporations.
In planning, management chooses short-term and long-term goals and draws plans to attain these goals (Kenno et al., 2020). Planning is vital in management in the long run. The objectives of a plan must be appraised based on the extent of attainment and the period of implementation. Managers need to provide feedback on the progress of the plan (Codesso & Lunkes, 2016). It is important to forecast on attaining fewer targets and elicit attention. When creating the personnel budget, the corporation is developing its goals for the use of labour resources (Codesso & Lunkes, 2016). The personnel budget becomes a vital criterion to evaluate how the steps of management guarantee that the objectives are attained.
Many benefits can be derived from personnel budgeting. It formalizes the coordination of activities between departments while aligning these activities to the strategic plan of the organization. The decision-makers are working towards the attainment of similar goals (Codesso & Lunkes, 2016). Furthermore, the budget enhances performance evaluations offering a common base for discussion on satisfying the goals, and offering a turning point about why actual outcomes veered from the earlier budget (Kenno et al., 2020). It encourages areas within the business to evolve as more efficiently.
Creating an effective personnel budget can be a difficult task because it involves more than playing with numbers (Kenno et al., 2020). Participation in the budgeting process plays a significant role in the communication between the management and the employee. It results in acceptance of the goals of the personnel budget (Codesso & Lunkes, 2016). The latter should be perceived to be fair and sound by workers whose performance will be compared to these objectives (Kenno et al., 2020). The process of developing the personnel budget with the team is a chance to hear the opinions of the team and share the vision of the organization.
Budgeting planning deals with preparing the short to medium-term plans of the corporation. It will be performed in the strategic plan framework. The yearly budget could be perceived as an interim step towards attaining the long-term plan.
Budgetary planning entails the construction of a personnel budget and using it to regulate the operations of the business. It strives to mitigate the risk that the financial results of a corporation will be worse than anticipated. The initial step in budgetary planning is to create a budget (Kenno et al., 2020). It comes to reality after implementing many tasks in chronological order. Firstly, the person must get strategic direction from the board of directors. Secondly, the manager is required to create a calendar of budgetary milestones. The specific due dates are needed to guarantee that the management team creates their ratios of the budget on a time interval for the pieces to be included in the main budget model. In addition, the personnel is required to develop policies and procedures of the budget to offer directions to the managers involved in the creation of the budget (Codesso & Lunkes, 2016). The personnel is necessitated to preload the budget as it is more efficient to supply managers with a preliminary budget model that constitutes an approximated budget. The personnel is mandated to issue the primary budget model that constitutes the procedures, policies, and milestone dates to r managers. The individual tasked with the budget offers support to the managers as they change the provided budget model. Nonetheless, it is recommended to aggregate and revise the model. When the respective managers return the budget segments, the segments are aggregated into a master budget model that is reviewed by senior managers (Kenno et al., 2020). Lastly, when the parties are content with the budget model, the boards of directors sign it on it, and the accounting unit loads it into the accounting software, leading to budget versus actual financial statements.
Operational planning is the short-term planning process and handles the planning of the use of the resources and it is conducted in the framework established by the budgetary plan. Every phase in the operational planning process can be perceived as an interim step toward attaining the budget.
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