Question

Why budget is important for an organisation, project or department to have a budget?

Answer 1

Budgeting is essential in the development of any major business project. Without a well-planned budget, projects can fall apart and be left incomplete. Budgeting is no simple process, however, as budgets can be fixed or flexible, depending upon the industry in which the project is implemented and based on the availability of additional income sources. Nonetheless, budgeting provides a number of different advantages that a project manager should consider.

Answer 2

The budget is an essential management tool. Without a budget, you are like a pilot navigating in the dark without instruments.

• The budget tells you how much money you need to carry out your activities.

• The budget forces you to be rigorous in thinking through the implications of your activity planning. There are times when the realities of the budgeting process force you to rethink your action plans.

• Used properly, the budget tells you when you will need certain amounts of money to carry out your activities.

• The budget enables you to monitor your income and expenditure and identify any problems.

• The budget is a basis for financial accountability and transparency. When everyone can see how much should have been spent and received, they can ask informed questions about discrepancies.

• You cannot raise money from donors unless you have a budget. Donors use the budget as a basis for deciding whether what you are asking for is reasonable and well-planned.