Question

Based on your literature findings (above), would you recommend the use of budgeting for contemporary organisations for planning and control purpose? (500 words)

Answer 1

Contemporary organisations

One of the basic difference between traditional and the contemporary organisations is that under the Contemporary organisations employees have the freedom to take any decisions, make changes and take ownerships of their own work without the interaction from the middle and the supervisory levels of the management and can work freely and help to reduce the organisation layers and share the information , personnel and skills across departments for the progress of the organisation.

Use of Budgeting for Planning and Control purposes

Budget are the quantitative expression of the plans which can be expressed either in physical or in financial term or in both normally budget is a plan showing how the resources are to be acquired and used properly over a specific time period that is budget is a method under which goals and strategies of organisation turn into operational terms.

Budgeting is a very important part in the planning and control process whereas planning provide a guidance which help management to develop the plan into action to estimate the future revenue and also cost. Basically in order to reduce uncertainty in the future and to increase the chance of achieving the goals and objective of organisation of the organisation by coordination of various plans are necessary.

While control is the process of using feedback on the actual performance of the operations of result and from that comparing the actual result with the plan and if there is any deviation from the plans are to be measured and taking corrective action to bring all future activities in process as per the plans ( budget)

If the deviation by comparing actual with the plan is found to be unrealistic or incorrect then the budget may have to be revised and updated accordingly .

So, planning and control process help the manager to make plan and helping how to use resources including the people and particularly goals and objective and also control over the use of resources as per the organisation goals and objective.

In the control process , the budget which is the plan of action is used to control by comparing actual operation and the performance as per the planned (budgeted) operation

In preparing a budget , a company can use various number of different ways like some use top-down approach and some company use bottom-up of approach in preparing the budget. Some companies for better control purpose revise their budget time to time ,say quarterly while other companies never change.

Some of the companies use flexible budget to evaluate managerial performance while other compare results against original estimates. The main purpose being all of these is to achieve the management objective for the long term plans of the business .

Budget also prepare for planning perspective and it is to be observed that budget is the glue that makes the different parts of the organisation fit together and it also harmonise the firms strategy with its organisational structure and its management and personal and to achieve the task by implement strategy.