The Role of Budgeting in the Current Economic Climate Essay

The Role of Budgeting in the Current Economic Climate - Essay ExampleProblems with the tralatitious budgeting trunk Any budgeting system has tierce major roles, viz., planning, motivation and evaluation (Banovic, 2005, pp. 4-5). Hence there are chances of three types of conflicts to arise. For the effectiveness of a budget, the planners are supposed to assess the companys functioning capabilities and therefore they get through an optimistic budget. They are under pressure to create a plan that would merge the targets desired to be achieved with feasibility of achieving the desired deed. This leads to the setting of more attainable targets thereby under using the available resources to the fullest extent. It causes omit of motivation among the employees. Secondly, the level of motivation superpower conflict the evaluation standard in the company. For the evaluation of performance certain rigid standards are maintained. This may not take into the consideration of unforeseen or rumbustious incidents. Thus, while on one hand the detailed knowledge about the evaluation standard might make the employees take it for granted at work for the fulfillment of the desired level, on the other hand, the incident of some uncontrollable incidents would not be accounted for the system and reflect a faulty judgment of a lesser performance. Finally, a minor conflict might arise in lieu of the differences between the possible assessment of the future prospects by the planning personnel and the need to get rid of the unfavorable environmental factors from the budget that goes for evaluation purposes. However this conflict is not a big one since adjustments can be made as required after the budget period ends (Banovic, 2005, pp. 4-5). Besides, the budgets are formulated on the footing of the functions of the different departments of an... This essay offers a comprehensive review of the current state of budgeting theory and its implementation in the process of central plann ing of corporate firms. Initially the concept of budgeting was designed for the senior executives in an organisation to control the activities in the organization directly from the business head. It acts as a centering tool by which the financial health of the company can be controlled. The benefits of budgeting include that of forecasting the future performance of an organization, addressing its developmental issues, promoting cohesion amongst the different departments and also predict any possibility of unforeseen expensesThe facility of system traditional budgeting system has made the budgetary practices to remain unchanged throughout the decades. Yet, the managers and administrators noticed various dysfunctional behaviors associated with the system. A company might encounter several unpredictable events which require rapid responsive action. But the plethoric budgeting process does not provide such space for immediate action.The budget which is designed to handle coherent te rm complex problems, cannot serve the purpose of the managing small failures with preciseness. Several companies now feels the need for modification in the traditional budgeting system. Research is still on in this sphere and more can be added to the cistron of risk management in the model of Beyond Budgeting. The ultimate objective is to construct a management model which is coherent, simple and integrated