Traditional Budgeting Procedures Assignment Example | Topics and Well Written Essays - 2500 words

Traditional Budgeting Procedures - concession ExampleSenior management cannot analyse corrective steps in time unless a compute is available. This is how an elaborate budgeting puzzle out keeps an organization on track.Coordination is the second gain of detailed budgeting because organizations consist of departments and functions which are strung-out on each other. The outputs and deliverables of staff functions are especially important and direct inputs on which grapevine functions rely. The expectations and predictions of line functions in turn, affect capacity planning by staff functions. A budget serves as a forum for coordination, so that all parts of an organization work in unison towards shared goals. outdoor(a) stake holders such as suppliers may also be involved in a budgeting function (Dickey, 1992).The third advantage of elaborate budgeting systems is that of feedback, and perhaps the most important. Budgeting allows overstep management to appreciate the ground re alities at the periphery of its structure, and gives an opportunity for nation who are in direct and routine touch with market and surroundings realities to contribute their perspectives to their employers. Budgeting, in this sense, is not a procedure to be carried out in isolation, but is an dick of great social interaction within an organization (Dickey, 1992).There are variations within the standard template of a detailed and formal budgeting system. Some management teams cull a top-down process in which they specify minimal goals which are to be achieved. These refer to growth, profitability, and image in organizations which work for profit. Other organizations prefer to allow the lowest levels of hierarchy to propose opportunities around which a budget can be made. This court relies heavily on scanning the environment by people who are in touch with customers, the dispersion chain, and with competitive moves. It is difficult in real life to have an elaborate budgeting pr ocess which is entirely top down or developed from the bottom to the higher echelons of structure. The budgeting process tends to be iterative in nature, with unlike levels and branches of organization in negotiating dialogue with each other, before consensus on targets can be obtained.This iterative process of budgeting leads to one of its main criticisms about drawbacks. Budgeting can be an expensive and time consuming process, which can take a substantial part of personnel capacities. An excess of deliberations about the future can also throw out of kilter attention and focus from short-term operational pressures.A second important limitation of formal budgeting relates to the uncertainties of a dynamic environment (Hope and Fraser, 2003). Conditions in which a budget has been prepared can change to such an tip that the accepted targets become irrelevant. The budget then loses its sanctity as a navigational tool, because it can no longer provide meaningful leads on how an orga nization fares.Budgets become invariably linked with individual instruction execution appraisal matters. It is but natural to reward people who achieve or exceed accepted targets, and the supplant also applies, though in lesser degree in case targets are not met. put achievement generates high expectations in terms of the people involved (Hope and Fraser, 2003). There are 2 consequences of this firstly, people tend to build as much slack as they can in to target definitions,