An Organization 's Political Structure

This research paper is a brief discussion of budget management analysis. Budgeting is the key to financial management, and is the key to translates an organization goals or plan into money. Budgeting is a rough estimate of how much a company will need to get their work done, and provides the basis for evaluating performance, a source of motivation, coordinating business activities, a tool for management communication and instructions to employees. Without a budget an organization would be like a driver, driving blinded without instructions or any sense of direction, that’s how important a budget is to every organization and individual likewise (Clark, 2005).

Ineffective practices in creating and monitoring a budget include failure of management to integrate the operating budget with other planning efforts (Academic Writing Tips, 2011). Organizational leaders should ensure that the long term and intermediate goals correlate with the operating budget. Failure to align the operating budget with various assumptions such as size, scope, and nature of future operations can pose a problem (Academic Writing Tips, 2011). According to Finkler and Ward (2006), upper management and financial officers usually create the operating budget omitting frontline and unit managers. This process can lead to failure in the financial management practices

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.

In a lot of organisations budgets are generally drafted from the ‘top- down’ and then passed down for comments, negotiation and agreement but generally it is believed that the more managers have full involvement in preparing their own budgets the greater their commitment to achieving them.

A budget can be thought of as a map towards a goal, such as retirement or saving for a particular items such as a house or a car. Subsequently, making a budget gives us a tool to complete this goal and keep us on track towards the end. Just as the financial planning process involves creating goals, budgets are a means to make the goals a reality and not just a dream. (Siegel & Yacht, 2009) One tool we learned about of course is being conservative, others include the cash budget when our income is less predictable, or a comprehensive budget which should include an operating budget and a capital budget. Moreover, there are times a specialized budget might need to be created for a specific goal such as a dream vacation or a tax

Budget formulation and use are tools that guide many decision making strategies in business. The measures that are least effective could create an avalanche of catastrophic events that can negatively impact the decision making strategies. It is in the best interest of the pertinent parties to draft an operating budget based on a collective set of information relating to organizational vision and mission. Ineffective measures can be catastrophic based on the foundation for measures used in creating the budget. Among the many issues organizations face that relates to creating an effective operating budget results from poor

By drawing from relevant literature and examples, critically evaluate the use of budgetary control by managers in an age where organizations are facing increasingly unpredictable environments.

The budget management process is not an easy task. It is time consuming and difficult. There are some ways to overcome the challenge of managing budgets within forecasts. One way is to budget and report beyond the ledger. Data should be looked at beyond the company’s financial system. This will allow the company to create more accurate forecasts. Next the budget software should be user-friendly. If it is easy to use, the happier the employees are to use and understand it. Thirdly, the budget should have the options to incorporate a flexible financial model. Managers should be able to input information on how their particular department relates to other departments or functions.

Budget is time-consuming, especially if it involves a poorly managed company. The budget only pays attention to the quantitative aspect of business while neglecting the qualitative aspects. It does not consider the quality of services or goods and therefore inconsiderate of customers’ satisfaction. Another disadvantage of a budget is that it is inaccurate. A firm rarely “makes budget.” The hope is that the business activity will be close to the budget, but it could be off considerably and lead to bad hiring, spending and production decisions. This is because budget preparation is based on assumptions and thereby changes in the business environment could lead to unachievable

Budgets can serve many purposes and can be a very advantageous tool for businesses to utilize. Budgets, as stated by Vitez, “represent a detailed analysis of how a company expects to spend money in future time periods” (Vitez). A few of the purposes a budget can serve are: limit expenses, outline trends, create a financial roadmap, improve cash flow by not having cash tied up in excess products, early warning, as well as business planning. Through analysis of the budget, it can be determined where the business is being wasteful and needs to become more efficient. This potential improvement outlines where there is opportunity for the business. The budget can also be used as a roadmap detailing the incremental financial steps the business should take in order to get to its desired location. By comparing the actual financials to the budgeted financials, any negative variances can serve as an early warning system to the business. This allows the business to make any needed changes to get the business back on track. Another purpose to the budget is for business planning, the budget can help to guide decision making and planning. Having the business stick to the proposed budget will help to determine what needs to take place for the business to succeed.

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).

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)

The 20’s century saw the use of budget involve due to a change in the environment. Indeed the control of output used to be obtained by the dissemination of tasks and so traditional budgets were very much highlighted, with a significant top-down influence. As an example of the importance of budget in the 1970’s IBM had about 3,000 people involved in their budgetary process. During the same period, the oil crisis brought concerns about rising in costs and led to the introduction of zero-based budgeting (ZBB), which can lower cost by avoiding blanket increases or decreases to a prior period’s budget. The increase in business uncertainties was in discrepancy with the stifling effect of fixed plans, promoting the use of rolling budgets. The 1990’s saw the growing influence of shareholders and steered the focus on a budget that included a wider view of organisation results, answering the investment community for quarterly updates on results and expectations (Bill Ryan, 2005). Budgets then started being used as a communication tool between the financial community and the organisation, allowing the corporation to be integrated in the capital market. Moreover companies started using flexible budgets rather than static budgets as nowadays various levels of activities can be observed in most organisations. The use of flexible budgets then enables firms to be consistent with their new environment and the market.

There are three budgetary approaches used in the modern world; line item and incremental budgeting, zero-based budgeting and performance-based budgeting (Hager, 2001).

Budget and budgetary control practices though very essential to meeting organizational goals, are mostly hastily and improperly prepared. This eventually leads to unfulfilled budget and budgetary control practices.