Question

Why is it important for budgets and reports to be presented in a clear manner, that they conform to management information requirements and how would a budget timetable or planner assist in satisfying this need? Discuss in 120–150 words.

Answer 1

Planning and budgeting are essential for management control. Effective planning and budgeting require looking at the organization as a system and understanding the relationship among its components.

Planning consists of developing the objectives (the work required to achieve the organization's goals), timetables, and performance standards needed to implement the organization's strategy and assigning individual accountability for results.   Budgeting involves identifying, prioritizing, acquiring, and allocating the resources needed to carry out the plan.

Strategic thinking and planning are different activities and require different mental processes and insights. Strategic thinking is a creative activity whereas planning is an analytical one. This difference in thinking can make it difficult to accomplish both of these processes at the same time.

The products of strategic thinking are goals and strategy. The products of planning are objectives, budgets, schedules, performance standards, and a baseline to measure and evaluate performance.

Benefits of adequate planning and budgeting-

1. Management activity is largely active, and organized.
2. Authority and accountability for results are clear or highly centralized.
3. Funding and other resource priorities are clear.
4. Cash flow problems are easily manageable in planned manner.
5. Objectives, schedules, and budgets are established or are properly communicated to persons responsible for action.
6. Performance expectations are specified or can be measurable in terms of goal achievement.