## Objectives of Budgeting
Budgeting serves three core management functions that operate in a cycle:
### 1. Planning
- Sets objectives and quantifies the course of action needed to achieve them
- Covers both short-term and long-term plans
- Begins by aligning performance targets with organisational strategy
- Assigns responsibilities for execution against quantified plans
### 2. Directing and Coordinating
- Directs business activities by establishing responsibility centres (units led by managers accountable for specific targets)
- Communicates objectives and expected performance levels to each centre
- Coordinates diverse activities so they pull in the same direction
### 3. Controlling
- Monitors, measures, evaluates, and corrects actual results
- Uses variance feedback (actual vs. budget) to fine-tune future activities
- Budget reports from responsibility centres provide performance insights
- Budgets may be revised to reflect unforeseen changes
- Prevents unplanned expenditures by regulating spending priorities
> Key Relationship: Planning → Directing & Coordinating → Controlling → (feedback loop back to Planning)