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Budgeting and finance functions are the core elements of an organisation. The main aim of the study is to derive the relationship of the finance function with the other segments of the management. The budgetary techniques used in organisational planning control, decision making and the importance of finance function are elaborated in this essay. The main concept of the budget is to estimate the expenses and revenue of a firm over a specified time. Financial statements and their uses are also defined in this essay to show the shareholder's interest in the organisation. Budget planning in a company and its efficiency within an organisation are also presented in a systematic way. Decision-making in a firm is a thoughtful and responsive part where the high authorities and the leaders of the organisation have to make effective and critical decisions to carry forward the business operations. Appropriate finance functions and other budget planning make the firm more efficient in managing risks and losses.
Discuss the concepts of budget and its use in planning, control and decision-making
Budget is an integral part of accounting where it is necessary to show the implications of planning. As opined by Al Breiki and Nobanee (2019), this is done to identify the resources that are required to achieve the stated plan of organisation within the given period of time. The budgeting function helps to measure and control the obtained budget with the help of the planning process. This is stated that the firm needs to establish certain standards that may help to allocate the exact budget for the works and investments related to the organisation. As per the view of Aydiner et al. (2019), budgets are also used to reduce the imminent issues within the company. These are appropriate tools through which the communication process is done between various departments of the organisations to point out the operational and financial goals.
Budgets are mainly utilized by the owners, individuals and government. As stated by Bals et al. (2019), it is a financial plan for a stated period, generally a year to enhance the planning process. Construction of the budget is used in the planning to control process because the executed plan needs finances or budget to carry on its operations. The main purpose of budgetary planning is to reduce the financial implications and risks to carry on effective planning. Moreover, moving forward is the basic concept of budgeting in the decision-making process. A budget allows a specific plan to move ahead with the stated limitations. As per the author Bashtannyk et al. (2021), it is also called the backbone of financial planning. Forecasting funds and budgets to continue prioritizing projects with efficient sources enables a beneficial outcome for the organisation.
The creation of budgets implies the finances and the costs are on track. Keeping regular records and budget planning at the initial phases of the business shows its effectiveness in maintain proper fund flow inside the firm premises. As per the view of Holgado et al. (2020), it provides greater confidence in the firm's decision-making process. Providing sound financial pieces of information to the technical and critical projects or investments make the base decisions effective.
Define and discuss the finance function and its relationship with three other functions
Finance functions are referred to as the decision-making aspects of the firm where the business management tries to carry out their operations with the current market segments. Managing and acquiring the financial resources to evaluate the profit segments of the firm are also stated in financial functions. The finance function consists of a few segments related to the business which are as follows.
The abovementioned function is performed in an organisation where the managers of the firm try to carry out all the events related to the organisation according to the modern market segments. As per the author Kaya et al. (2019), this function performs different responsibilities in maintaining accurate findings and investments. All the above mentioned decisions are made within the organisation by facilitating proper measures and outcomes. Finance functions show the effectiveness of the financial or investment decisions in the firm to ensure fruitful outcomes in near future. New investments are usually evaluated with the help of these financial functions in terms of gaining profitability. As opined by Keers and van Fenema (2018), an organisation tends to earn benefits when its market value rises by multiplied percentages. This is also stated that the firm needs to evaluate the market position to show the financial function in a clear and concise manner.
The relation of the finance function with marketing, production, and human resource management functions is reflected by the integrated elements. As stated by Moll and Yigitbasioglu (2019), without a finance function, the other business functions are of no use. Financing is directly related to the purchase of the materials to the sales and consumption process. On the other hand, it is also used till the material is returned to the owner for resale purposes. In relation to marketing, finance functions are used to monitor the trends of the marketing process. In contrast to this, the marketing function performs the responsibility of managing the growth of the business. The finance functions in relation to dividend decisions are dependent on the cash outflow of the organisation. As mentioned by Möller et al. (2020), decisions regarding the liquidity of the firm are connected with the assets management of the firm. This is a prerequisite for a firm to obtain long-term success growth.
Uses of financial statements by the relevant stakeholders
Financial statements are prepared to showcase the financial position of a firm in the current year or a specific period of time. As per the view of Rikhardsson and Yigitbasioglu (2018), it is mainly used by owners, shareholders, external users, auditors and investors. In the context of stakeholders, the financial statements are used to get enormous information related to the organisations. The pieces of information consist of expenses, debt, earnings, shares, investment, revenue, debt load and ability to meet the obligations. As stated by Saeidi et al. (2019), the investment and other acquisition decisions are taken on these elements by the shareholders. Mainly the growth and expansion and increasing the current capability of the firm in near future are ascertained by the shareholders.
In the context of suppliers, the annual reports are used to ascertain the ability of suppliers for a long period of time. The evaluation of financial statements by suppliers retains the suppliers and keeps their insights to the firm only. If the profitability of the firm is openly showcased before the suppliers, then they will not shift their interest to other organisations. In the context of HMRC, the financial statements are used to examine the tax for the current fiscal year. HRMC is stated as the “tax authority of the U.K. government”. The government uses the annual statements to evaluate the “stewardship of resources, compliance with legislation and other authorities, state of finances and performance”. This is stated as they are involved in economic planning through the tax levitations in the country. Forward economic plans are made after certain all the taxes are incurred by the business.
In the context of managers or other external parties, the financial statements are used to get the profit and loss positions of the respective firms. As mentioned by Settembre-Blundo et al. (2021), publishing financial statements in front of external users and the managers of the firm ensures the accomplishment that is run through the organisation. It can be stated that the users can use the financial data to ascertain the allocated budgets and the overall expenses. Therefore, all the amounts are compared to ascertain the exact position of the firm. The external parties are referred to as Suppliers, Banks, media and HMRC, where they ascertain the current and previous data from the annual reports and compared the company's perforce for years. As per the author Wamba-Taguimdje et al. (2020), these data are also compared with other firms to get the competitive norms. This comparison is directly interchanged in the performance of the organisation in the same niche or market.
Based on the above context it can be stated that the budget planning and finance functions are the core elements of financial management. An organisation consisting of these elements gets competitive advantages as well as gets a huge response in catering for the uncertainties that are availed in the firm. The business dynamics totally affect the performance of the firm, changes in the stock market or retail business change the business propositions to maintain an equal balance of revenue and losses. However, the abovementioned decision-making process and finance function must be used in every firm to get the actual results with beneficial outcomes. Users of the financial statements evaluate the data to ensure the accuracy of the management in dealing with the uncertainties. Both the elements are used to analyse the financial metrics where the firm may take decisions in favour of the company. Organisations must use financial strategies to enhance their business operations.
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