Traditional budgeting does have its advantages because it helps a company with decision
making. “Because a budget makes it easier to spot issues, you can decide to make changes to
your business. If you are exceeding your budgeted expenses, you can cut back and reduce
business expenses that you deem unnecessary” (Blakely-Gray, 2018).
However, the budgeting process can be time consuming. “Estimates suggest that senior
managers spend about 10-20% of their time on budgeting, and financial planning
departments spend as much as 50% of their time on it” (Datar, Rajan, 2017 p. 201).
Traditional budgeting can also be an inaccurate representation of the goals a business wants
to reach. Managers and business owners can manipulate projections to make actual results
look more attractive, which will hurt her business in the long run (Blakely-Gray, 2018).
I think that companies should consider other forms of budgeting other than traditional
budgeting. “More and more businesses are moving toward operating without a long-term
budget and working with 13-week cash flows instead” (Rygelski, 2018). These are easier to
keep updated and provides a better picture of reality to make decisions from.
References
Datar, S. M., & Rajan, M. (2017). Horngren’s cost accounting (16th ed.). Boston, MA:
Pearson.
Rygelski, M. (2018). Budgets Don't Work: Here's How Businesses Can Do It Differently.
Retrieved from forbes.com/sites/forbesfinancecouncil/2018/01/05/budgets-dont-
work-heres-how-businesses-can-do-it-differently/?sh=3485c4e846b8.
Blakely-Gray, R. (2018). Understand How Traditional Budgeting Can Impact Your Small
Business. Retrieved from
https://www.patriotsoftware.com/blog/accounting/traditional-budgeting-system-
process-advantages-disadvantages/
