Identify and briefly explain five critical success factors that you may encounter during the budgeting process.

Five key factors that affect the budgeting process:
i) Demand: the annual demand or any relevant period‟s demand must be estimated first before the purchases, products and expenses budgets can be prepared.
ii) Plant Capacity: Is a critical factor especially in small firms – high growth markets. They must utilize their limited capacity in such a way as to maximize profits.
iii) Labour: Highly skilled labour is a key factor to consider especially in the developing countries where such labour may not be readily available of is very expensive.
iv) Capital: This is the main key factor in capital budgeting. The project that will utilize the cash to generate the highest level of profits are taken first, ceteris paribus.
v) Raw Material: This is a key factor especially if the materials supply fluctuates over time. Some materials are also very expensive.
vi) Machine hours: These are the constraints in capital-intensive firms because the machine capacity may be lower than the capacity required to meet the market demand. The available capacity will have to be utilized such a way that profits are maximized.