Monitoring Budget Costs

Financial resources are needed in the businesses because they have to monitor their finance because; they need to insure that they have enough money in order to buy products and to pay their employees. They then also have to make sure that they have enough money so that they can pay off their bills as well. Financial resources are the cash or loans that a business has, or has access to. A business's non-financial resources are their employees, technology, equipment, buildings, warehouses and information systems. Within the financial and non-financial category come two more types of resources: internal and external.

Internal resources are financial or non-financial resources that a company owns, or has in-house. External resources are financial or non-financial resources that a company does not own, but may be able to use externally. When businesses evaluate their internal environment, they are analysing the areas of their work that they have control over. Internal environments may include, but are not limited to, the organisational structure, purchasing behaviours, research and development and manufacturing processes. Within the internal environment are internal resources, such as finances, staff, equipment, and machinery and information technology.

Businesses should perform environmental scans of their internal environments and resources, they should document their findings, examine the trends in their environment, review and analyse the inventory and use the information for decision-making techniques. External business environments are the areas that a business does not have control over, but can still be impacted by. Common external environments can be categorised as environmental, political, economical, technological, legal and social. Within these external environments businesses can identify external resources.

Technological advances, for instance, are operated external resources. By knowing what is available to businesses in the external environment, decision makers can analyse risk potential and understand how their business can be progressed or slowed down by external resources. Monitoring Budget Costs: At the beginning of a businesses year, the business will start to start formulate a budget which is their objective to forecast what their profit will be at the end of the year in the assumption that the budget will remain the same through out.

The budget will be monitored quarterly or monthly to see if the profit they projected at the beginning of the year is still realistic. Monitoring their budget will give them the flexibility to adjust their wants, needs and must have so that the projected profit is realisable at the end of the year. Profit is the measure of a business performance. Ideally, the process of budget planning for the next financial year should give everyone in the organisation an opportunity to reflect on what they've achieved, what the external environment is telling them and where they want to go next.

In times of recession, businesses will aim to increase revenues or they may maintain them, they could specifically target a certain market, or invest more in a profitable area. Businesses will focus on these specific areas by everyone in the business. Unfortunately, hardly any business gathers the full rewards of focused engagement with the budget process. Too often businesses are facing the future with budgets that are reluctantly thrown together by cost centre managers with other things on their mind.