An Evaluation Of Cairns Taxis Limited

Budget management analysis is used by mangers as a tool and helps determine that all resources available are being used efficiently. The budgets are determined yearly and are based upon the previous year’s budget and variances. This paper will discuss specific strategies to manage budgets within forecast, compare five to seven expense results with budget expectations, describe possible reasons for variances, give strategies to keep results aligned with expectations, recommend three benchmarking techniques, and identify those that might improve budget accuracy, and justify the choices made.

Budgets should not be a managers task only. The whole organization should be involved in the budgeting process.

A company's budget serves as a guideline in planning and committing costs in order to meet tactical and strategic goals. Tactical goals such as providing budgetary costs for daily operations, and strategic objectives that include R&D, production, marketing, and distribution are all part of the budgeting process. Serving as a guideline rather than being set in stone, the budget is a snapshot of manager's "best thinking at the time it is prepared." (Marshall, 2003, p.496) The budget is a method in which to reign-in discretionary spending, and will likely show variances between what costs have been anticipated and what costs are actually incurred.

Budgets serve five main purposes; planning, facilitating communication and coordination, allocating resources, controlling profits and operations and evaluating performance and providing incentives. The budgeting process requires both technical and interpersonal leadership skills to achieve each of these purposes effectively. The director’s memo demonstrates several short comings in the budgeting process. The director instituted the “responsibility accounting system” as a means of evaluating performance. However, the DPW director has not consulted Sam in the budget process. Sam understands that his total expenditures are impacted by relatively unpredictable events that contribute to an uncontrollable element of his cost. The

The article, "The Case Against Budgeting" explains how the budgeting process has essentially become obsolete in the current business climate. Krell explains that many businesses feel that the budgeting process takes too much time and when it's finally completed the final product is usually less than desirable (2003). "Businesses need more agile forecasting and reforecasting capabilities, but the organizational barriers to those capabilities are formidable" (Krell, 2003). Krell reviews the most common reasons that most budgets fail; it's usually a hybrid of reasons from shoddy strategic planning, to an inability of the management to take strong corrective action, to a general absence of faith in the budget, resulting in an overwhelming amount of apathy (2003). Krell describes how ineffective budgeting can be toxic to a company, creating a state of overaggressive assumptions leading to decreased morale within employees, cash flow conflicts, consistent disappointment and necessary reforecasting, surprises in earnings, postponed capital acquisition, and developing a state where bad decisions are made over and over again (2003). Krell clearly highlights how perilous bad budgets can be for an organization, both fiscally and for the atmosphere and sense of accomplishment.

Firstly budget can be defined as “a quantitate expression of a plan of action and aid to coordinating and implementing the plan”(Horngren, Sundem and Stratton,2013). To add to this definition Collier(2006) also suggested profit is based on a defined level of activity and it takes into consideration of future time periods. budgets main purpose can be split into assisting managers in control and planning of the firm, moreover it also include sub factor such as acting as a communication device between departments. Furthermore jill collins definition for budgetary control is the process by which financial control is exercise by manager preparing budgets for revenue and expenditure for each function of the organisation in advance of accounting period. It also involve analysis of performance of department

The purpose of this paper is to examine the question of whether the budget has outlived its usefulness in the 21st century. Over the past 20 years, people within the academic and business worlds have argued that it is time for companies to move away from traditional budgets to a concept known as beyond budgeting (Sandalgaard & Nikolaj Bukh, 2014: 409-410). Researchers and business practitioners have argued that the traditional budget process requires too much time, with some estimating that traditional budgeting requires 20% of management time throughout the year to complete (Neely, Bourne & Adams, 2003: 22). Others have also argued that traditional budgeting is flawed because it provides an incentive for managers to essentially lie about how much money they project to spend or the revenue and profits they project to achieve in order to receive more monies or to demonstrate reduced spending to corporate leaders (Hope & Fraser, 2003: 108). However, some researchers and practitioners have explained that the entire idea that the traditional budgeting process is going to end in favor of the beyond budgeting concept is incorrect given that most organizations continue to prepare and use traditional budgets (Jackson & Starovic, 2004: 2).

Budgeting can be an important management tool if implemented properly. Identify several positive results when budgets are used properly. Since budgets affect people, identify several negative aspects if budgets are not implemented properly. (20marks)

Budget management analysis is commonly used by mangers as a tool helping to make sure that all resources in existence get put to use correctly. The budgets are determined annually because they are determined by the preceding year’s budget and differences. Budgets can be controlled by specific techniques to control budgets within prediction, consider five to seven expense results with budget anticipations, explain possible factors that cause fluctuations, present ways to keep results associated with goals, share three benchmarking strategies, and consider the ones that could increase budget accuracy, and give good reason for the choices made. (Finkler, 2007)

Hope and Fraser (2003) are strongly against traditional budgeting and think it is fundamentally flawed. They argue budgeting consumes large amounts of management time, impede a firm’s flexibility and is disconnected from strategy and thus out of sync with competitive requirements.

Having a plan book (operating budget) but not checking to ensure that all of the contributing factors are aligned is irresponsible. The only way to ensure that the company is on budget is to balance the books and ensure that the cost drivers are in line. To do this the department managers need to review and ensure that actuals are in line with the standards calculated during the creation of the budget.

There are also behavioural problems associated with budgetary control (Demski and Feltham, 1978, page 336) states that “the dysfunctional behaviour thy may induce are well known”, they being budgetary control. In terms of budgets that are inflexible, (Jones, 2006, page 94) speaks of managers using “creative budgeting ” by “ creating slack in the system to give themselves leeway ” this is a way to mitigate shocks to the business, especially in am an unpredictable environment. This may not be ethical but mangers see it as a necessary evil, as their use of the budget tend to be used as a means of assessment and evaluation. As they fight to control the budget, they also fight to maintain their jobs and current position within the firm. Therefore this unsavoury behaviour is created by the use of budgetary control, and where the business environment is unpredictable this behaviour, can become even more damaging to the business as a whole and not just the department itself. It also “creates a use it or lose it mentality that encourage managers to spend their entire budget to avoid a reduction in resources” (Whitecotten et al, 2013, page 328). This unnecessary spending again is costly to the business, as

Taking into consideration the current economic climate, to investigate how beneficial a beyond budgeting approach would be, in regards to flexibility and financial control of the business. To also explore the possibility of adopting an Activity Based Costing system and the benefits it would bring to the company. Lastly, after reviewing the benefits and shortcomings of all three methods of budgeting, determine which method is the most suitable for the managing director.

Budgeting is a key contributing factor in the measure of performance for a company. If companies setup budgets for each of their departments or organization as a whole and fail to remain within these budgets it could mean losses of profit for the company and their shareholders. Over time, companies have learned that some outside forces cannot be controlled and failing to neither plan nor have a course of action for when these events happen, has driven companies into a hole. Eventually as companies started to notice how certain events influenced their overall performance from a financial budget point of view they developed tolerances or ranges for budgets to measure performance better, this began the idea of flexible budgeting. Budgeting is a direct indictor of performance and while it has evolved there is still need to practice annual and flexible budgeting to truly measure performance, while also taking it a step further to provide organizations with more precise information that flexible budgeting may not provide.

In order to reveal the nature of budgeting at business organizational level, it would be best to begin by comparing