How Does Budgeting Impact People - Essay Example

The managers should show their consent for achieving the budgetary targets. In this way, the managers will be motivated to achieve the desired budgetary targets.

How does budgeting impact people?

Budget is like a pressure device. For example, each department is given certain budgetary goals and targets and they are to be achieved within a specified period of time. Consequently, the department manager will be required to work hard and take the necessary steps for achieving the budget targets. Sometimes, the given budget targets are difficult and challenging. In that condition, the department manager feels the pressure because the given targets look unachievable.

Budgeting control?

Budgetary control can be defined as determining and evaluating the planned budget with the actual results and taking necessary measures to obtain the budget objectives. In budgetary control, first, a budget is planned and its objectives are also determined. Subsequently, after getting the actual results, they are compared with the planned budget. After that, if certain budget objectives are not met, the causes will be investigated and then the corrective measures will be taken.

Activity-based budgeting?
Activity-based budgeting means budgeting based on activities. In this budgeting process, activities that incur costs are summarised and recorded, and subsequently analyzed. After this step, it is the responsibility of the related department manager to identify and establish a relationship between them. By knowing the relationship between cost and activities, the managers become in a position to develop an achievable. Based on the relationship between activities and costs, the managers can use the actual results and forecast the cost behavior and its subsequent trend and impact on the overall budgeting process.

Zero-based and flexible budgeting?

Zero-based budgeting means the entire budgeting process should be started from scratch. The budgetary objectives, goals, budgetary targets, budgetary planning, and other features of budgeting are started from zero level. On the other hand, flexible budgeting is different than zero-based budgeting because only some adjustment is carried out in certain budgetary targets and the rest of the aspects of the budget remain the same.

Uncertainty?

Uncertainty is common in business activities. How many items should be produced? What will be the purchase cost of raw materials for the next two years? And certain other related questions and issues are considered under the framework of uncertainty. In order to avoid future uncertainty and its impact on overall organizational performance, different types of budgets are made. For example, a sales budget is set for estimating the expected sale of certain items whereas the production budget is developed for producing a particular number of units in a specific period of time.