The Cost of Traditional Budgeting Approach - Essay Example

How the cost of traditional budgeting approach leads to the birth of beyond budgeting How the cost of traditional budgeting approach leads to the birth of beyond budgeting.IntroductionBudget preparation is an important activity for every company. This is because if it is not properly done, then a company can suffer huge losses because some of its projects may become non-operational. Although for a long period of time, it has remained unchanged. However, this phenomenon is slowly changing as some financial analysts are arguing that even the annual budgeting process should be abolished altogether (Hanninen, 2013, 1).

In addition, traditional budgeting is expensive and time-consuming (TRG, 2012, 34). For example, it uses about 20 % of management time, thereby reducing the time that can be used to do other important activities (Goode, 2011, 208). In addition, Goode says that some companies use up to $1.2 billion shillings per year during the budget process. This can prove to be very expensive considering that the budgeting process only adds little or no difference to the shareholders assessing the birth of beyond budgeting these problems associated with traditional budgeting led to the birth of beyond budgeting.

This is because it has the ability to reduce the amount of money spent during the budget process. In connection with this, beyond budgeting has been adopted by many companies (Rothberg, 2011, 2).ConclusionIn summary, the birth of beyond budgeting has been at the center of some of the best-performing companies because it reduces the amount of money spent during the budgeting process and it also a little time is required for the budgeting processes.ReferencesRothberg, Arthur F. (2011) Traditional budgeting Vs beyond budgeting: Three core differences.