Budgeting and liquidity:

Abstract

This paper examines the role of budgeting not only in solving financial indiscipline, but also as a tool for improved liquidity in donor funded institutions. It is built on the premise that budgeting is not just a financial plan but also a list of all planned expenses and revenues. There has been a continuous concern within donor funded organizations of how finances put aside enough to cater for short term obligations, do not perform to the required expectations hence continuous employment of audit firms to help solve the issue. This paper argues that despite this being a good idea, it is not so inclusive. The most affected, the paper argues, are the employees of such organizations. These employees express their concern aboutpoor liquidity from their own point of view and suggest that the role of budgeting is important in attempting to understand finances and cash flow within the organization. The paper contends that there is need for proper budgeting approach and process in order to provide a stable and more reasonable liquidity level. This paper more so suggests the proper budgeting approaches and how they are used to derive maximum financial efficiency and control so as to keep liquidity at a reasonable level as well as strategies for improved liquidity. Donor funded organizations shall overcome internal financial instabilities especially low liquidity hence a smoother flow of finances for better organizational performance.