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Company budgeting

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none
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General public
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economics
School/University
IU

About the document

Marieta M.
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documents in English
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term papers
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4 pages
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General public
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  1. Introduction
  2. The five basic principles of budgeting
  3. Dispensing the company's budgets
  4. The point of encouraging bottom-up thinking
  5. Budgeting as a necessity
  6. The current business situation in the dawn of the 21st century
  7. Dependency model
  8. Beyond budgeting model
  9. The management process in Handelsbanken
  10. Conclusion
  11. Bibliography

Is company budgeting necessary? There are two general opinions in management theory. Malcolm Howard is standing behind the statement that ?budget is still a worthwhile exercise ? as long as you stick to five basic principles?. He argues that some of the problems claimed to be budgeting issues are clearly management problems. It's manager's mission to set the goals for the coming year and develop a strategy, a plan, including milestones. It is the manager's responsibility to finalize that plan.

According to Howard, there are five basic principles of budgeting:

1. All employees should be involved.
2. The budget must be realistic.
3. The outputs must be linked to the inputs.
4. Managers to recognize the concept of flexibility.
5. Managers have to learn from the process.

Howard's message to managers is that they should involve the staff in the process. Communication has to come on first place and budget has to be a bottom-up creation. Rewards and incentives must be included for those whose dedication brought the fruits of success.

[...] The Beyond Budgeting model is rarely adopted in such organizations but as small firms grow it's recommended for them to bypass traditional budgetary. Other authors as W.H. Wiersema (need to budget, The) are supporters of the theory that small companies should benefit from the budgeting practice of the large companies. Wiersema stands behind the thesis that ?budgeting has benefits for any size of company?. In my opinion, budgeting takes too much of manager's time and still there's a danger of it becoming inadequate to the changing market situation. [...]


[...] The Beyond Budgeting model is one of the best decisions of the present day. David Dugdale and Stephen Lyne's investigation from 2006 show that most of the manufacturing companies in the UK are using budgets. Large companies usually have complicated structures. Most of the financial controllers and the finance directors say they regard budgeting as a key element in their structural and procedural planning. Most managers agree that budgeting is too time-consuming process. Banks and other financial institutions are prime candidates for decentralisation, following the example of Handelsbanken. [...]

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