Budgetary Control And External Control

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.

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

A budget is a tool that helps managers to ensure that the required resources are obtained and used effectively and efficiently as the organization moves towards achievement of its objectives. A budget is stated in terms of money and is usually made for one year depending either on the prior year’s budget or on existing programs (Cleverly & Cameron, 2007, p. 330). Creating a working budget is a very difficult undertaking, and for the budget to be functional, an organization must stick to the budget very closely. No matter how closely a budget is followed, there will be variances. Organizations can expect such variances and be able to work such situations into budgetary

(Libby and Lindsay, 2010) decided to investigate budget managers’ overall perceptions, views and control uses of budgeting as well as their plans for budgeting in the future.

The budgets are based on expenses incurred in the preceding year and the estimates of the branch managers, sales manager and the manager of marketing. In which any adjustment of budgets are based on their judgement and understanding of the business.

It is possible that managers will set budgets which are not in line with the organization’s strategy as lower-level managers lack strategic focus. Moreover, lower-level managers may have difficulties to set up the budget because their budget may depend on the forecasts of other departments as for example, the cost of production may depend on the scale of production which has to be estimated by the sales department. Furthermore, employees need to be trained in setting up budgets and there needs to be someone who controls the submission of all budgets at a specified time. In this respect, absences and changes in position may become a challenge when conducting a bottom-up budgeting method.

Budgets are very important part of business environment. They are considered to be essential key drivers and evaluators for planning and control as well as managerial performance since 1920 (Reka et al., 2014). This report aims to investigate how to promote a cultural framework that is suitable for the modern dynamic business environment. Firstly, it will explain the concept of budgetary control, It will then point out advantages and disadvantages of the current traditional system and how some weaknesses can be addressed by implementing Beyond Budgeting (BB) using practical examples of organisations that have been successful and what were the problems that they have encountered. It will also discuss why some organisations

Budgeting is a main instrument of management control for most organizations’ systems. Recently it is a controversial phenomenon, the disappointment with budgeting is occurring. This is because some people find that budgeting processes is time consuming and often lead to dysfunctional behavior. Additionally, they make organization fail to be flexible in such an uncertain financial environment. Many people think traditional budgeting systems should be abolished, but others wish to improve them. Hope and Fraser (2003b) provide a few European companies that have abolished traditional budgeting systems successfully. On the other hand, Eckholm and Wallin (2000) observed approximately 61% of firms will improve the budgeting processes and continue to use them as control purpose. This paper argues that whether budgeting should be abolished or not mainly focus on three aspects, “fixed performance contracts”, time consuming and the changes of budgeting in real life. Evidence is presented that as a control instrument although budgeting has some shortcomings, it should not be abolished. Instead, those shortcomings could be addressed by some improvement measures.

Budgeting is an important key in the management process. It is essential in the planning, organizing, and controlling. Ultimately the budget function as a control technique not just for cost, but for all resources (Ward Page 63). There are various type of budgets prepare by an organization. They all complement each other.

Budgets are needed by many organisations and have been used since 1922, they’re considered to be key drivers and assessors of performance within a business. They’re mainly used in an attempt to plan and control organisations and their objectives. An organisation’s political structure is mainly affected by budgets as the managers at the top tend to use budgets as a means of power and authority. Traditional budgeting has both advantages and disadvantages; recently, critics seem to be against the use of traditional budgets within organisations. This is due to traditional budgeting being assumed to be very out of date; it has no way of being used in a contingency plan as it has nothing to do with the changes of markets. If the market

Traditional budgeting is the process of budgeting which is in use for the past many years in the organizations. It is based upon single basis; mostly indirect costs are distributed to all products and services. Often products which have higher volume are over costed. And the lower volume products are often understated. It is incremental in nature; old techniques are used, have a short term view and mainly deal with smaller segments. Traditional budgeting takes no account of the fact that income are uncertain, unplanned things arises, that social, political, economic situations change without warning and stock markets rates moves unpredictably. Traditional budgeting is now outsourced in most organizations. This is due to the effect that budgeting serves

Budgeting is a main instrument of management control for most organizations’ systems. Recently it is a controversial phenomenon, the disappointment with budgeting is occurring. This is because some people find that budgeting processes are time consuming and often lead to dysfunctional behavior. Additionally, they make organization fail to be flexible in such an uncertain financial environment. Many people think traditional budgeting systems should be abolished, but others wish to improve them. Hope and Fraser (2003b) provide a few examples of European companies that have abolished traditional budgeting systems successfully. On the other hand, Eckholm and Wallin (2000) observe approximately

“The budget provides the manager with basic information about the unit's operations, supplies raw material to make better sense out of those operations, and helps to avoid operations that are using up money too fast “(Iaconetti, 1986, p. 22)”.

Through the use of budgeting as a system of organisational control, perhaps the most effective benefit is the system of control itself. Senior managers can use information involving planned performance and actual performance to establish a basis of control. This control will allow senior management to employ a technique upon junior management known as management by exception. This involves senior management spending most of their time monitoring the staff or activities that have failed to meet their budget. In doing so, the senior management will save time because they will not have to deal with those who are exceeding performance expectations. Furthermore, this technique also allows junior managers to practice self-control. They will be able to assess themselves in order to find out why they are under performing and take the necessary steps to correct what they are doing wrong.

5. The success of budgetary control depends upon the support of the top management. If there is lack of support from top management, then this will