What Is Budget Management?

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Budget management is the analysis, organization and oversight of costs and expenditures for a business or organization. Managing a budget requires adhering to strict internal protocols on expenditures. A well-managed budget allows for continued smooth operations and growth.

A budget normally allocates specific amounts of money to various items that require funding. A budget also keeps track of incoming profits. Managing any budget requires a constant balancing act of maintaining good levels of cash flow without going over the budget limit. When a budget is out of balance, the manager must find ways to increase or reduce spending in certain areas.

A company relies on good budget management in order to operate on a daily basis without going into chaos. Bad management of money often leads to severe shortfalls in cash and can put a business in real jeopardy.

A typical budget allocates funds for payroll, general expenses, equipment, services, taxes and miscellaneous expenditures. Careful decisions have to be made regarding the amount of money spent each month on specific items. For instance, a manager may have to postpone purchasing a new piece of equipment that has the potential to help the company produce more in order to make payroll. Payroll is a budgetary expense that cannot be spent arbitrarily or sacrificed for other costs. Instead, the manager must project how long it is expected to take to acquire the necessary funds to purchase the desired equipment. This type of decision is common in budget management.