BUDGETING

Budgeting

Budgeting

Introduction

The use of budgeting has become more important and effective for many organizations in the world. Budgeting is a tool that is referred to the goals and objectives of a firm in financial terms. It shows the financial planning of the organization during a fiscal year. According to Lu (2011) Budgeting helps the firm in generate reports that help in preparing the comparison of monthly performance of the organization in different areas like sales, profit, cost and etc. The critical analysis of budgeting will help us find out that whether the use of budgeting has lost its relevance in current management of the organizational goals and objectives or it has increased. Fraser and Hope are among many researchers who have written many articles on the fact that budgeting dominates the actives in an organization rather than bringing enhancement in the activities of the firm. The report will also take into consideration the views of BBRT given against the budgeting and will compare it with the articles written in favor of budgeting. Thus the report will try to find out that whether it is a tool for making the organizations successful or influencing the management decisions of an organization and make it unsuccessful.

Discussion

The major concern of budgeting in an organization is to control and plan all the activities in financial terms over a fiscal year. According to Zeneca (2010) Budgeting helps the organization in performing several budgeting functions which include planning, organizing, directing, staffing and controlling. It helps the management in defining the path and the targets that set a direction for the subordinates to enable them achieve the organizational goal in the end. The management in order to develop an evaluation about the performance of the organization or each department, it uses comparative analysis between the budgeted amounts and the actual results to see the variances or deviation from the goal set by the firm. The management then takes corrective actions to eradicate the variances or differences between the actual and the budgeted results so that targets of the organization are achieved within a specific time period.

To what extent does the type of organization, its culture and environment affect how successfully a budget might operate?

According to Segun and Olamide (2011) many people gave their view that budgeting is on its way of extinction and is losing their place in modern management. Many business managers gave their view that budgeting is taking too much time, too many cost and preserving the behavior of the managers thus it is being strongly criticized by the users in the modern world. Apart from the criticism faced by budgeting still many organizations develop their yearly and monthly budgeting reports and use them for taking several financial and management decisions. According to a survey conducted among 20 companies of Europe that were using budgeting as a performance measurement tool and had no future of abounding it in the years to come. According to Lindsay and Libby (2007)Budgeting previously was used to create centralization and control the ...