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critically evaluate budgeting as a tool for planning and control. - Essay Example
Author : diamonddickens
Finance & Accounting
Pages 5 (1255 words)
A CRITICAL EVALUATION OF BUDGETING AS A TOOL FOR PLANNING AND CONTROL Date For a long period, companies and firms have used budgeting as a tool for planning and control. At a personal level, financial experts encourage people to draw personal budgets as a way of monitoring their expenditures…
According to them, not only is budgeting a time consuming undertaking, it also is prone to manipulation by the management. Proponents of the budgeting process hold that it is only through budgeting process that firms can achieve proper financial planning. Despite having its advantages, budgeting has its disadvantages too. This paper aims at evaluating the pros and cons of budgeting, with reference to previous research done by different authors. Libby & Lindsay agree that budgeting has its own advantages and disadvantages. According to Libby and Lindsay, most organizations find budgeting as an important key in managing their control systems. Budgeting plays a number of major roles to the management in fulfilling their managerial roles in an organization. Through budgeting, coordination, communication, as well as performance evaluation of an organization is possible. Consistently, and over a long time, external evaluators have used the budget as a measure of organizational performance. The ability of the organization to meet its budgetary commitments determines the organization’s performance. Although in some regions, budgeting has lost meaning, in others, such as North America, it is still a very important element of management control. ...