To budget or not to budget. It is the questions that companies are
asking their managers to consider. c Traditionally, budgets are the
proposed plan of action by management for a specific period. c Used
for the current year or as a follow-up to the prior year ending
accounting cycle. Budgeting is a help to managers by helping
departments to set goals, judge and measure performance or even
motive employees. c
In the article it talks about how ineffective budgeting can be. GL
groups points out that they sway from using budgets. Their reasoning
for this way of thinking was because budgets are inflexible and
cannot be adjusted once that are set in place. Also, budgeting can
have a negative affect within a business. For example, managers may
be force to think that their expense budget should be used in its
entirety even if it is not needed. Or it can lead to poor decisions made
to meet certain expense goals.
I agree with the decision made in the article to look at employees,
customers and operations to make decisions on where money is
spent. This will lead to placing monies within the business that will
provide the best outcome for the business. Answering the important
questions of timing, does it make sense, or what is the worst that can
happen. Not to budget.
Traditional budgeting is most likely the best way to go. There is
always a way to create a solution whether it needs to be altered as in
cutting back on it or increasing it for that quarter. Although it does
have its cons by the budget being manipulated or it can carry Errors
which gives a false of what was spent during that quarter. They are
used mostly in smaller businesses since the previous spending is being
used to generate a budget.
TRADITIONAL BUDGETING: OVERVIEW, ADVANTAGES, AND
DISADVANTAGES - CFAJournal
Budgets Don't Work: Here's How Businesses Can Do It Differently by
mark Rygelski
