Demonstrate and explain how you would prepare forecasts and budgets for a business.
You will need to:
· explain the purpose and nature of the budgeting process
This is about the importance of managing operational income and expenditure activity in line with organizational strategies and objectives – forecasting, planning, monitoring, etc, over a set period. Give an example from your own or a selected organization of this in action.
· select appropriate budgeting methods for an organization and its needs
Ideally using (the whole or a part of) your own organization or one you can research, very briefly describe methods such as Incremental, Zero Based, Programme, etc, and select and justify one of those.
· explain how you would prepare budgets according to the chosen budgeting method
Following on from the previous criteria – describe how you would prepare (gather data, forecast, plan, implement) that budget
· explain how you would prepare a cash budget
For many small organizations the Cash Budget is “the budget”, but in larger organizations a Cash Flow budget is often prepared as a sub-budget – dealing only with, literally, cash – that is received from sales and lodged in the bank then consumed by operational activities. This is usually linked to a Cash Flow Forecast.
You should explain how (for a reasonably complex activity area) you would prepare one of these.
The question belongs to Finance and it discusses about preparing forecasts and budgets for a business. The purpose and nature of budget, selecting appropriate budgeting methods and preparing budgets according to the chosen methods have been explained in the solution.
Total Word Count 436
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