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Essay example - The Role of Budgeting in the Current Economic Climate

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Masters
Essay
Finance & Accounting
Pages 10 (2510 words)
This essay tries to address the importance of budgeting in the current economic situation and the dysfunctional behavior that emanates from this practice. There are limitations accrued to a concept of traditional budgeting. Advantages of the Beyond Budgeting model are highlighted in the essay…

Extract of sample

This essay offers a comprehensive review of the current state of budgeting theory and its implementation in the process of central planning of corporate firms. Initially the concept of budgeting was designed for the senior executives in an organization to control the activities in the organization directly from the business head. It acts as a management tool by which the financial health of the company can be controlled. The benefits of budgeting include that of forecasting the future performance of an organization, addressing its developmental issues, promoting cohesion amongst the different departments and also predict any possibility of unforeseen expenses
The facility of system traditional budgeting system has made the budgetary practices to remain unchanged throughout the decades. Yet, the managers and administrators noticed various dysfunctional behaviors associated with the system. A company might encounter several unpredictable events which require rapid responsive action. But the prevailing budgeting process does not provide such space for immediate action.
The budget which is designed to handle long term complex problems, cannot serve the purpose of the managing small failures with preciseness. Several companies now feels the need for modification in the traditional budgeting system. Research is still on in this sphere and more can be added to the element of risk management in the model of Beyond Budgeting. The ultimate objective is to construct a management model which is “coherent, simple and integrated”
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