Explain the Following

1. Explain the Process/Flow of Budget Cycle

A budget cycle is the life of a budget from creation or preparation, to evaluation. Most small
businesses don’t use the term “budget cycle” but they use the process and go through each of
its four phases — preparation, approval, execution and evaluation. Prepare Your Budget, The
first step of the budget process is to create it. Done right, this process starts with careful
thought at the ground level. How much income is needed and what new initiatives can be
started should be considered.As the small-business owner, your leadership and vision will
guide what’s included and what's excluded from the budget. You’ll consider anticipated
revenues; expenses for employee wages, operations and materials; and costs for any
improvements you plan to make to your company.Get Your Budget Approved, While the
political budgeting process is a bit messy, one of its underlying principles is very meaningful
for your business. Budgets aren't approved on a yes or no basis. Instead, they're the subject
of debate.While, at times, the political process can distort budgetary priorities, businesses
don't have to fall prey to that problem. Instead, the approval process can be an opportunity for
you to step back and take another view of how your company is spending its funds.Most
small-business owners handle all four phases of their budget’s cycle themselves. This is fine
but don’t do it in a vacuum. Have your accountant or a trusted peer look at it before you stamp
it “Approved.”Execute Your Budget,Once a budget is approved, it’s time to implement it.
Unlike the federal government, business owners like you can’t impound funds to prevent
wasteful spending. But you can adjust your your business tactics to handle increases in
spending or lower than expected revenues.Most of the time money comes in and goes out in
accordance with the budget. A good budget isn't a limitation on what your company can
spend. It's a financial embodiment of your company's strategy and tactics for the year.
Evaluate Your Budget Regularly, Even the best planned budget should be reevaluated from
time to time and, if need be, revised. Changes in revenue, adjustments to costs and new
information about your customer base are examples of things that may require budget
revisions.The government audits and evaluates spending to ensure that money is being spent
lawfully. But ongoing evaluation of your business’ budget requires a wider lens. You’ll want to
keep an eye on how effectively money is being spent. But what really matters in business is
whether you’re operating at a profit.Think of your business’ budget as a living document that
can help you define your goals. The four phases of a budget cycle provide the framework for
achieving those goals.

2. Explain the process/flow of the Local Budget