A well-prepared budget provides the following benefits:
1. a guide to help managers align activities and resource allocations with organizational goals;
2. a vehicle to promote employee participation, cooperation, and departmental coordination;
3. a tool to enhance conduct of the managerial functions of planning, controlling, problem solving, and performance evaluating;
4. a basis on which to sharpen management’s responsiveness to changes in both internal and external factors; and
5. a model that provides a rigorous view of future performance of a business in time to consider alternative measures.
Because of its fundamental nature in the budgeting process, demand must be predicted as accurately and with as many details as possible. Sales forecasts should indicate type and quantity of products to be sold, geographic locations of the sales, types of buyers, and when the sales are to be made. Such detail is necessary because different products require different production and distribution facilities, different customers have different credit terms and payment schedules, and different seasons or months may necessitate different shipping schedules or methods.