ASSIGNMENT

The Use of Budgets in the Performance Improvement and Controlling Businesses



The Use of Budgets in the Performance Improvement and Controlling Businesses

Overview

Most of the organizations make use of performance management systems and fixed year, that limit their actions, but today this annual process of budget planning is the heart performance management of organizations. The planning budget is an expensive process, fail to add value and increasingly distant from the competitive environment companies (Bierman & Smidt, 2012, pp. 43-73). The adoption of a management model based on Beyond Budgeting is the final action and a decisive change process, in that by replacing centralized network hierarchies decentralized. Compared with the traditional model, Beyond Budgeting is a more adaptive management. Instead of fixed annual plans, which force managers to perform predetermined actions, goals are reviewed frequently and objective-based elastic linked with performance compared to benchmarks of excellence, contestants and previous periods (Libby & Lindsay, 2010, pp. 56-75).

The Purpose of Budgeting

A budget is a future assessment and planning instruments in numbers reflects the organization's strategy, ambitions and goals. The budget is usually done once a year and is an activity that fosters participation among employees and clarifying roles and responsibilities in the organization. Once a budget has been set as the target is (or preferably exceed!). The set budget forecasts are used as control instruments by management to ensure that the organization remains on track to achieve the adopted budget (Bierman & Smidt, 2012, pp. 43-73).

The forecast includes data for the results achieved to date and the expected changes they believe will apply to the set of assumptions the rest of the budget period. If the forecast shows deviations from the budget so can lead with the support of the forecasts make the necessary changes. It is becoming more common to move away from quarterly forecasts to rolling monthly forecasts. This requires rapid and reliable forecast briefings. The reality for many organizations is that this process is so time and resources to the value of the counteraction of the required effort.

Briefly, the purpose of the budget is to provide a forecast of revenues and expenses that provide a model of how the business will develop in the financial terms of strategies, events and plans are driven in case. It uses business financial results to set forecasts (Taylor, Kowalczyk, & Klein, 2011, pp. 133-160).

CFOS and controllers love to sit isolated and budget in Microsoft excel because it is both easy to use and powerful. Common problems that arise are:

Focus to the manual work to properly handle numbers and formulas instead of spending time on analysis and understanding of the budget.

It becomes difficult to effectively manage multi-dimensional organizations when budgets must be placed on such department, office, customers, products, periods and currencies.

It will be hard to get more employees to cooperate effectively on a shared budget and subsequent elapsed time for validation and consolidation of data.

It becomes difficult to bleed to plan and manage changes in conditions in the global set of assumptions (Bierman & Smidt, 2012, ...