APC 309 Strategic Management Accounting

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Module Title: Strategic Management Accounting Module Code: APC309 Individual assignment SUNDERLAND BUSINESS SCHOOL Date: 16/04/2011 Introduction: As Gowthope (2005, p.148) said that: “A budget is a plan, expressed in financial and/or more general quantitative terms, which extends forward for a period into the future. Budgets are widely used in organisations of all types and sizes.” –Budgeting actually refers to the process that, after the strategic plan of the business has been made, companies made a short term plan (usually one year) to meet the strategic purpose. Traditional budgeting has offered a lot of contributions in so many years‟ practice; no one has a better summary of all advantage of traditional budget as (Umapathy, 1987,…show more content…
Implementing TBA on a dynamic market: “Fixed budgets don‟t work today. A budget is a too static instrument and locks managers into the past – into something they thought last year that it was right. To be effective in a global economy with rapidly shifting market conditions and quick and nimble competitors, organisations have to be able to adapt constantly their priorities and have to put their resources where they can create most value for customers and shareholders.” Juergen H. Daum. (A management and executive adviser) As Juergen explained, budgeting tools that were created to serve businesses back in the manufacturing era where production costs and revenues were foreseeable will not be effective in today‟s „information age‟ where the market is globalised. This traditional annual budgeting system is not suitable or relevant in rapidly changing markets, many companies believe that budgets do not deal with intangible assets like brands and knowledge and fail to focus value (Davies T. and Boczko T. 2005 p.408). In today‟s global market where conditions and demands are unpredictable and hard to be determined in advance, an event like 9/11, the Arab‟s revolution, and the earthquake that hit Japan will definitely change the way

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