Question

Companies all around the globe use master budgets, but there is considerable variation in the use of participation in the budgeting process. In some countries, top-down budgeting is prevalent, while in other countries, companies frequently use participative budgeting. Why is it important to fnd out who within a company participates in the budget process?

Answer 1

Budgeting in corporate businesses is a team effort involving people from all organizational levels. Managers and individual contributors from every department do their part to provide information that company executives use to draft budget proposals. At the end of the day, members of the board of directors are ultimately responsible for approving or denying budget recommendations, but those recommendations result from work done throughout an organization. Understanding who handles the budget in corporate businesses is a must for entrepreneurs considering the corporate structure.

1.Mid level departments, as front-line managers, report departmental expenses and revenue contributions to both the accounting department and their own managers, providing the fundamental information necessary to project future income and expenses. Department managers also make personal recommendations or requests for their departmental budgets based on their experiences on the front line.

2. Corporate accounting teams manage companies' payrolls, accounts payable, accounts receivable and bookkeeping system. Senior accountants can be given a range of duties in the budgeting process

3.Role of Executives: Chief operating officers forecast future operating and payroll costs, while sales directors forecast the next year's sales trends. Chief marketing officers forecast the next year's marketing expenses and expected market-share increase, while chief technology officers forecast expenses for technology needs.

4. Then finally the proposal reach to the Board of directors who have the powers to either approve it or reject it based on company's objectivity and profitabilty.

So in the above scenario all the levels of the organisation plays an important role in budget process so that their individual efficiency is increased in next period.