Cash budget serves as the most important techniques of planning and controlling the use of cash. Cash budget is the statement that depicts the firm’s estimated cash receipts and estimated cash disbursements drying the plan period. A firm can apply a number of cash management techniques to improve the efficiency of cash management. Managing Collections, Controlling Disbursement and Cash flow synchronization (Michael, 2016) are the three major technique of cash management and budgeting.
By maintain the proper budgeting a firm can speed up its cash collection effort by using lockbox system and concentration banking. The should be able to take the advantage of float meaning that the firm should shorten its collection float and lengthen its disbursement float as long as possible without any deterioration in creditworthiness (Libby, 2009).
At first we give the specific training package to our employees so that only they have clear understanding of why budgeting process is important in business. After clear understanding they automatically motivate for investment. They should have clear knowledge about capital budgeting and its process. The budgeting is the process of acquiring the fixed assert or process of investment in capital project. It is very important investment decisions. Its impact is long lasting, and involves the considerable amount. So, it is considered as crucial function of financial manager in any firms. Financial manager should make capital budgeting types - dependent, independent, mutually exclusive project, replacement, expansion, and diversification of capital project cautiously.
There are two types of decision criteria: undiscounted cash flows and discounted cash flows. Payback period is the commonly and widely used undiscounted cash flow method and NPV and IRR are the popular discounted cash flow methods. All methods of capital budgeting decision expect to the ARR are based on the net cash flows of the project. ARR is based on the accounting profit of the project. Discounted cash flow methods. Since they take all cash flow streams while making capital budgeting decision into account, incorporate the risk and time value of money in decision process. They should have clear understanding of NPV and IRR so that they can confidently invest money by using budget. These are the important criteria how budgeting can be described overall context of project so that our employees are motivated for investing the cash.
Budgeting process helps to determine project size.
Budgeting process and plan helps to determine project life.
It helps to determine the timing of investment.
It also helps to determine helps to improve quality of assets acquisition.
It helps to arrange the financing.
Budgeting process helps to determine project size
Generally, the project size refers to the amount of money that is required to be invested in a project or assets. The size of project must be optimal. The budgeting process helps to determine the optimal size of the project because it is monetary presentation of capital expenditure plan. So that employee can invest confidently in any project.
Budgeting process and plan helps to determine project life
The Budgeting is the process of forecasting and estimating expected cash flows of a project. Therefore, it helps to determine optimal life of the project. When they have clear idea about project life then they are motivating toward investment.
Helps to determine the timing of investment
The organization must install capital asset before requirement, otherwise, the similar firm may increase their market share and the demand goes down. Therefore, the capital budgeting is based on expected future demand, so it helps our employee to determine appropriate timing of the investment so that they confidently invest the money.
References
Libby, T. &. (2009). Beyond budgeting or better budgeting? Strategic Finance, 89( 2) .
Michael, O. (2016). The Importance of Budget and Budgetary Process among Non-Publicly Accountable Entities (NPAEs): A Survey of Micro-Sized Firms in Nigeria. International Journal of Business and Management, 4(7):305-312 .
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Cash budget serves as the most important techniques of planning and controlling the use of cash. Cash budget is the statement that depicts the firm’s estimated cash receipts and estimated cash disbursements drying the plan period. A firm can apply a number of cash management techniques to improve the efficiency of cash management. Managing Collections, Controlling Disbursement and Cash flow synchronization (Michael, 2016) are the three major technique of cash management and budgeting.
By maintain the proper budgeting a firm can speed up its cash collection effort by using lockbox system and concentration banking. The should be able to take the advantage of float meaning that the firm should shorten its collection float and lengthen its disbursement float as long as possible without any deterioration in creditworthiness (Libby, 2009).
At first we give the specific training package to our employees so that only they have clear understanding of why budgeting process is important in business. After clear understanding they automatically motivate for investment. They should have clear knowledge about capital budgeting and its process. The budgeting is the process of acquiring the fixed assert or process of investment in capital project. It is very important investment decisions. Its impact is long lasting, and involves the considerable amount. So, it is considered as crucial function of financial manager in any firms. Financial manager should make capital budgeting types - dependent, independent, mutually exclusive project, replacement, expansion, and diversification of capital project cautiously.
There are two types of decision criteria: undiscounted cash flows and discounted cash flows. Payback period is the commonly and widely used undiscounted cash flow method and NPV and IRR are the popular discounted cash flow methods. All methods of capital budgeting decision expect to the ARR are based on the net cash flows of the project. ARR is based on the accounting profit of the project. Discounted cash flow methods. Since they take all cash flow streams while making capital budgeting decision into account, incorporate the risk and time value of money in decision process. They should have clear understanding of NPV and IRR so that they can confidently invest money by using budget. These are the important criteria how budgeting can be described overall context of project so that our employees are motivated for investing the cash.
Budgeting process helps to determine project size.
Budgeting process and plan helps to determine project life.
It helps to determine the timing of investment.
It also helps to determine helps to improve quality of assets acquisition.
It helps to arrange the financing.
Budgeting process helps to determine project size
Generally, the project size refers to the amount of money that is required to be invested in a project or assets. The size of project must be optimal. The budgeting process helps to determine the optimal size of the project because it is monetary presentation of capital expenditure plan. So that employee can invest confidently in any project.
Budgeting process and plan helps to determine project life
The Budgeting is the process of forecasting and estimating expected cash flows of a project. Therefore, it helps to determine optimal life of the project. When they have clear idea about project life then they are motivating toward investment.
Helps to determine the timing of investment
The organization must install capital asset before requirement, otherwise, the similar firm may increase their market share and the demand goes down. Therefore, the capital budgeting is based on expected future demand, so it helps our employee to determine appropriate timing of the investment so that they confidently invest the money.
References
Libby, T. &. (2009). Beyond budgeting or better budgeting? Strategic Finance, 89( 2) .
Michael, O. (2016). The Importance of Budget and Budgetary Process among Non-Publicly Accountable Entities (NPAEs): A Survey of Micro-Sized Firms in Nigeria. International Journal of Business and Management, 4(7):305-312 .