Sheffield Surgical Ltd (SSL) is a SME which manufactures high quality stainless-steel and titanium surgical instruments. It has built outstanding reputation and significantly expanded. However, the sales are gradually declining whilst having continuous rise in operating costs. The Current Traditional System (CTS) has displayed much frustration. Therefore, SSL is considering the concept of ‘Beyond Budgeting’ for a remedial action.
The purpose of this report is to discuss the principles of ‘Beyond Budgeting’ and explain how it promotes a cultural framework that is suitable for the modern dynamic business environment. It will explore three significant parts:
• Budgetary…show more content… Figure 1: The budgetary control process (Ogden, 2016)
It is essential for managers to understand and be aware of the benefits and drawbacks of Current Traditional System (CTS) for effective implementation of budgetmanagement.
CTS provides a framework of control that makes it easier to manage and control with stability. It can be a motivational factor by setting clear objectives for managers to clarify the responsibilities (Jones, 2004). The performance of responsibility centres is monitored by the comparison of actual results with the budgeted (Ogden, 2016).
Departmental budgets provide overview plan of the activity in each area. Having a budget enables businesses to communicate the set targets to and from managers and other staffs. It promotes coordination and significantly improves communication between departments (Jones, 2004).
CTS provides financial control and evaluation of performance. It provides the organization with the ability to investigate the differences which are called budget variances (Ogden, 2016). It is useful because the information can be effectively utilized to improve future business performance.
CTS has an inflexible structure which might ultimately lead to losing opportunities. It reduces initiative and innovation to develop new ideas at lower levels, making it