Company management means making decisions under uncertainty. The quality
of such decisions, i.e. the probability that the desired results are actually achieved, depends on the quantity and quality of the information that is available to the person making the decision. The acquisition, preparation and processing
of all information that facilitates rapid adjustments to the company's situation and environment, is the task of business planning and budgeting.
Although the terms planning and budgeting are often used interchangeably, there is an important difference between the two:
Planning is an intellectual process in the anticipation of future action alternatives. Budgeting on the other hand is a business planning tool that combines all numerically-oriented planning procedures. Budgeting in the narrowest sense is the creation of the budgeted profit and loss account (planned profit and loss account, performance budget), budgeted balance sheet and financial plan. It summarizes all the business plans and sub-areas relating to the budgeting period (usually one year). The compilation is described as “budgeting”, the result as the “budget”.
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