Introduction
It is all in the game if the budget allows the projects of an organization to be done. Every financial activity that a firm undergoes has to be decided with respect to the budget that has been planned with respect to the same. Under the conditions it is very important to know what a budget actually means. A budget is formal document that states the monetary capacity of a firm to plan, control and allocate its resources accordingly. In other words it is the presence of money that is converted to currency as and when it is required by the firm. IT is very important to know the company’s earnings while deciding the budget of a particular firm. The reason for the same is that it is this guarantee of income based on which a firm can plan its planning and the events that follow. So, the further processes of monitoring and resource allocation would depend largely on what the budget fixes for them with respect to the earnings that the firm can make in the near future. Before the financial activities are changed from what had been planned earlier, it is required to make the necessary changes in the budget so as to ascertain whether the changes are feasible by the firm or not. As for example, if a company thinks of up-stretching in the market, it would have to check if the allocated resources as per as the budget allows it to do so currently or in the required period or not. (Southgate, 2010)
The above graph shows how competitive Abu Dhabi is as compared to the other cities of the country. This is because of a well-planned budget of the country.
Budget and its Role in Planning
One can see the importance of budgeting in planning from the examples of some of the top real estate structures that have been constructed in UAE in the past. Some of them are the Arabian Ranches in the top cities of the country, the construction of Address Hotel and some similar stature buildings. The amount of planning required in the construction of these structures went to a high degree. For example, if the budget required about 200 million AED for the construction of any of the companies, it would have to plan the financing from sources like debts and equity. It is this planning of finding the leverage of the firm that the budget helps one to do. Accordingly one can take the respective loans in order to complete a project. If the budget allows the risk associated with raising money from the debt market, it can be taken; if it doesn’t then the company would have to look for certain investors who could become shareholders of the company.
There are also other areas where planning has been done on the basis of the budget planned. Consider the telecommunication giant, Etisalat for example. The company had serious needs to mend its ways so as to compete with the other entrants into the market. This could only be possible if the budget of the company allowed it to do so. The reason for the same is that if a country switches over from marketing strategy to another, it would first have to check its budget before making an analysis of the risk-return trade off.
Planning of the tourism department of the country is also highly based on the budget sanctioned to them. This is the reason that in spite of having a Muslim origin, the country has been able to draw a number of non-Muslim expatriates and tourists as well. Very recently the world saw the Palm Islands made in reality. The planning of the structure that the world looks up to is based on budgeting done for the same. (Husain, 2010)
Budget and its Role in Controlling
There have been many areas where corrective actions have to be taken so as to put the projects back on track. This is where the role of budgeting in controlling comes into play. Two of the pioneers in the manufacturing of electronic and electrical goods in the country are Huda Lighting and Imation UAE. Both the countries have employed staff for expediting purposes in the country. These production staff goes to the respective vendors and the shop-floors so as to motivate them to supply and produce more respectively. It must be acknowledged at this point in time that the amount of expense that the production staff incurs is a substantial part of the total spending of the company. This could never have been possible if the budget of the firm would not have allowed this to happen. The role played by expediting in controlling, has also worked a great deal in the past. These mentioned companies have all made much larger profits that they could have predicted with the use of this control measure. It could never have been possible without the use of an adequate amount of budgeting. The budget has to ensure that the expenses incurred by these production staff in going about to vendors and shop floors actually works for them more than it costs.
One of the most important control measures that we have in the near past in the corporate is the implementation of ERP (Enterprise Resource Planning). Once again the budget for the same is more than half the total budget of the organization. The reason for the same is that it not only has a client focus but it also solves certain real life examples and manages the client along with the staff. One has to convince the top-management in order to implement such a powerful system in the organization. The top management would only agree to the implementation once the budget allows it to do so. The reason for the same is that even their powers are diluted by doing the same. But, if the budget allows it to happen, the management would have no other option but to implement it and finally improve the chances of the firm to perform better in the future. So, one cans see the most significant of the control measures like implementation of expediting and Enterprise Resource Planning are based on the shoulders of the budgeting done by the company. This is also an indication that the budgeting of a company has to keep a number of facts in mind so that it does not bring false hopes which get ruined in the future.
Budget and its Role in Resource Allocation
One of the most significant factors that highly manage the risk-return trade off of a firm is the resource allocation that the firm does. Resources are not only in terms of people but also in terms of the equipments and the inventory that a company would have to maintain as a result. Much of the resource allocation processes like loading in the production, planning and control is dependent on the budget that has been decided for the firm. The reason for the same is that loading allows resource allocation to a particular unit of a firm in all the ways that have been included earlier. Without the budget conforming to this resource allocation, it could never have been feasible. This is where budget gets into action in every minute unit that a firm establishes. For example, the recent construction of Executive Bay and Capital Bay was based on the resource allocation that the budget made for them. The reason for the same is that these sites are both innovations in their respective manner. So, there was a vital requirement of building them as soon as possible. Had they not done the same, the fresh entrants could certainly have destroyed their brand value. So, the companies had planned its resources so as to make on time as preferred in the market. Once again, it must be acknowledged that only a proper budgeting made this into a reality.
The above graph shows the increment in the hotel guests as a result of an improved budget of the country.
Conclusion
From the evidences that have been given above, one can conclude the fact that budgeting has one of the major roles to play in the financial structure of a company. Almost all the business plans that have been developed of late were a result of budgeting done in order to improve their implementation. Much of the tourism as we have seen has only developed because of the inclusion of a proper budgeting to make it happen. So, one can say that not only are a company’s future prospects dependent on the type of budgeting that it follows but it also effects the national economy of the country as a result. UAE would never have the type of place without the construction of some of the most sought-after structures in the world. The land was all about deserts which by no means could have attracted the tourists. What has made this a possibility is the budgeting of some of the most well-planned events and activities of the nation. It is therefore recommended that of a company hopes to make a new plan in the corporate, or decide its controlling measures or its resource allocation, it would have to be particular about the budget that make it happen. If it is not so, the company would only see disastrous results in the future. (DeFiore, 2010)