Is The Budget Has Outlived Its Usefulness On The 21st Century?

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).

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

Budgeting systems turn managers’ perspectives forward and by looking to the future and planning, managers are able to anticipate and correct potential problems before they arise (Horngren, Foster & Datar, 2000). Through budgeting, management can plan ahead and maintain enough cash to pay creditors, to have adequate raw materials to meet production requirements, and to have sufficient finished goods to meet expected sales (Kieso, 2002).

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.

Budgeting involves decision making regarding revenue and services for both public and nonprofit organizations. Furthermore, budgeting provides the infrastructure and financial means for our public systems and services. Primarily, the goal of budgeting is to achieve a balance between revenue and expenditures. Governmental allocation and appropriation of funds are a utilized as a political device to uphold the public interest. Appropriations permit policy proposals to manifest from aspirations into accomplishments. Budgeting is the financial consideration that provides resources to the policy promoted throughout all levels of government. Thus, budgeting promotes the values of the executive branch that matriculates to the federal, state and local levels of government. Tedious is the budget process and each stage must be completed meticulously prior to the advancement of each phase so that the budget is successfully implemented.

In todays ever changing business environment the traditional budgeting model is no longer able to effectively provide an organizations with the tools

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.

As the corporate world evolves and transforms over the previous couple of years, there is a greater need to switch to more efficient and quicker methods to boost performance. Traditional budgeting has often been condemned as a slow, time-utilizing and expensive form of accounting procedure that does little to achieve the demands of our progressive era. New methods and models have been derived to keep up with the ever changing world we live in. Most accounting financialists have recommended that organizations switch from traditional budgeting to beyond budgeting. This business report will discuss what beyond budgeting is and why it is preferred by analysts over the traditional form of budgeting. Furthermore, it will also present a case for traditional budgeting by detailing its strengths and weaknesses.

It makes the education of budget for departments less complicated as well as for the organization as a

This paper will be an exploration of what budgeting and forecasting are and how they are determined and why they need to be re-evaluated. Furthermore, the hope is to uncover some of the underlining causes that drivers that trigger the re-evaluations in our organization as well as discover ways to mitigate those factors.

The traditional budgeting process has been criticized as a cumbersome process which occupies considerable management time. This process might take up nearly half of the year to prepare for some company. This is because “most of the budgets are very detailed and require the input and back and forth negotiation of many people throughout the organization, which only adds to the

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.

Budget and budgetary control practices are undeniably indispensable as organizations routinely go about their business activities and operations. These organizations are constantly on the alert on how actual levels of performance agree with planned or budgeted performance. A budget expresses a plan in monetary terms. It is prepared and approved prior to a particular budgeted period and explicitly may show the income, expenditure and the capital to be employed by organizations in achieving their goals and objectives.