PLANNING

Planning :

The process of budgeting begins with the establishment of specific targets of performance and is followed by executing plans to achieve such desired goals and from time to time comparing actual results with the target goals. These targets include both the overall business targets as well as the specific targets for the individual units within the business. Establishing specific targets for future operations is part of the planning function of management, while executing actions to meet the goals is the directing function of management. It may be explained as

•  Budget plans are made in synchronisation with the overall objectives of the organisation, keeping mission and corporate strategy into account. Individual plans at unit level should be in consonance with organisational plan.
•  Budgets reflect plans and that planning should have taken place before budgets are prepared. 
•  Budgets plans are quantified and responsibility is assigned to the persons who are responsible for execution of plan. 
• Using the budget to communicate these expectations throughout the organisation has helped many a companies to reduce expenses during a severe business recession. 
• Planning not only motivates employees to attain goals but also improves overall decision making. During the planning phase of the budget process, all viewpoints are considered, options identified, and cost reduction opportunities assessed. This process may reveal opportunities or threats that were not known prior to the budget planning process.