BUDGETING

Improving the Budgeting Process or Abandoning the Budget Altogether

Improving the Budgeting Process or Abandoning the Budget Altogether

Introduction

For the successful implementation of the strategies and to support the decision making of management in that implementation, budgeting serves as a keystone in this regard. In addition to the implementation of strategies it is important tool for controlling and planning its operational resources. It is a process which is highly structured, budgeting is a multidimensional thing, it is used as a benchmark in comparing with the actual actions of the company with planned actions through valuing them in money. Once it is selected for implementation then the company authorizes the resources consumption up to a certain level for the execution of those action plans. While comparing the plan date with the actual data and that results show deviation from the standard, showing a need for improvement methods of planning or to alter the operational processes both across & within the units of business. The process of budgeting therefore hugely facilitates the overall control and coordination of the activities at firm's level of over its main divisions.

As most of the studies have shown that organizations consider this budgeting overwhelmingly as the most important tool for controlling. For instance, 85% of the companies located in Austria were surveyed and they agreed to the analysis of the differences between actual results and budgeted is the completely vital, basic job for controlling purpose. They are too agreed on the comparative analysis of the occured results with the benchmarked costs in those budgets which are flexible comprises the most essential element within operational controlling. Similar finding has been produced with the surveys which were conducted in Germany (Özel, 2003).

However in spite of the widespread employment, controllers and top managers greatly voice the dissatisfaction with the process of budgeting as a tool for controlling and planning. For example, a survey which was conducted in European enterprises in 2003 showed that the manager agreed generally that the budgetary and planning processes were very ineffective and all the above they are inefficient. Still though the most interviewees which only can supposition at the amount of the assets that were dedicated to them. Merely because the people thought that small benefits could be yielded through the utilization of large resources. Accordingly, 79% of the firms which were surveyed planned the changes in the process of budgeting, while a small circle of 13% even considered abandoning the process of budgeting in total.

The former CEO, Dieter Brandes of the Discount Super mart in Germany chain Aldi North, is one of the managers at high rank who sees budgets as totally unnecessary. In the view, controllers think of different concepts ( for example integrated performance management, balanced scorecards, value-oriented controlling, push button controlling, operational performance measurement, consolidation of the complex value chain, high end controlling and so forth) and overvalue their capability. As a consequence, they contribute significantly to the complexity growing which is linked with the management of ...