Budgeting Within the Business Organization

2861 Words Apr 20th, 2006 12 Pages
The budgeting process and the end product, the budget, comprise two essential elements of multinational management: planning and control. Planning is the primary function of the budgeting process and the result, the budget, provides the basis for subsequent monitoring and control of activities. For a multinational firm, with geographically dispersed subsidiaries to coordinate and control, an ineffective planning and control system can be disastrous.
For the typical multinational firm, the budgeting process is the primary period of planning at both corporate and subsidiary levels. During the planning phase, the subsidiaries establish short-term goals and objectives, devise appropriate operating strategies, and prepare a budget document for
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This stage 's effectiveness I believe is equal to the planning stage. The company has to be realistic in examining the separate departmental budgets to look for discrepancies within the budget. If a company does not successfully identify all problem areas then the company may have less capital than aware of. On the other side of that coin if the company does not evaluate the different units correctly and has overlooked capital, there could be more capital that can be utilized for new programs and units.
 Evaluation – is the stage when the company monitors and assesses the budges performance. The budget committee should be taking a look at variances and impacts internal and external to see effects on the budget. This is the stage for reflection.

(FMBP, UN, 2002)

I believe that this stage can be effective but usually is not. This occurs generally when upper management examines the prior budget for how well the company did as a whole. In my experience this is when upper management overly criticizes departments for coming in over budget making the unit leaders fix the issue next time to prevent getting chewed out (Mayberry, 2006). This phase can contradict the control phase by pressuring unit managers to doctor their budgets to stay out of trouble or gain a certain bonus. Overall I deam hindsight is always 20/20, and when looking back at what was accomplished companies generally
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