An organizational budget is a plan covering all phases of operations for a definite period in the future. It is a formal expression of policies, plans, objectives, and goals laid down in advance by management for the organization as a whole and for each subdivision thereof. Budgets serve a multiplicity of purposes including: forcing managers to direct attention to the formulation of the objectives and goals sought; coordinating operations through the manner in which budgets for different functions are integrated into a comprehensive budget; and setting standards against which actions can be measured.
Budgeting not only facilitates but forces integration of functional elements in both the development of plans and in carrying them out. Budgets force managers to concentrate on quantifying ends to be achieved. They can be used as a vehicle for widespread participation among people in the planning process, thereby promoting better understanding and motivation for achievement, and bridging the gap between strategic planning and current actions.