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As businesses move into the technology age, there is an ever more need for real time decision making and planning to sustain competitiveness. Budgeting plays a vital role in converting medium term plans into short term plans thereby supporting managements’ decision to capitalise on the short term opportunities. This essay critically assessed the benefits and demerits of various budgeting styles, identifying the critical links between budgeting and short-term decision making. Further, a critical assessement of the impact of changing environments on various budgeting styles is made, before evaluating the merits and demerits of participatory budgeting and implication on business performance.

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LCBB5002 Management Accounting Case Study


Key Learning Outcomes

By the end of the case, students should be able to:
  • Critically assess the benefits and demerits of various budgeting styles.
  • Identify critical links between budgeting and short-term decision making.
  • Critically assess the impact of changing environments on various budgeting styles.
  • Evaluate the merits and demerits of participatory budgeting and its implication on business performance.

 

Assignment question

As businesses move into the technology age, there is an ever more need for real time decision making and planning to sustain competitiveness. Budgeting plays a vital role in converting medium term plans into short term plans thereby supporting managements’ decision to capitalise on the short term opportunities. 

You are required to critically assess the role of budgeting in helping managers make optimal decisions within a constantly changing environment, this includes evaluating static and flexible budgeting styles with the aim of identifying the most suitable for this scenario and assessing merits and demerits a participative budgeting.

 

1.0 INTRODUCTION


Regardless of their size, industry and complexity, enterprises heavily rely on budgets and budgetary systems in order to achieve their strategic goals. Budgeting is very important as it helps companies identify their goals, allocate responsibilities for the achievement of these goals, and consequently execute them (Shah 2007; Raghunandan et al 2012).  In fact, it is considered one of the most successful and useful management accounting methods and if properly implemented firms can reap major rewards.

Today’s business environment has become more volatile most especially because of a fast-changing technological environment characterized by constant innovations. This has made it essential for managers to incorporate budgeting systems in their strategic objectives in order to survive in the highly competitive environment (Kovaleva et al 2013). As noted by Horngren et al (2016), budgeting is essential in shifting planning, to the forefront of an organization’s management while limiting spending. In fact, the authors noted that the most successful and well-organized organizations have made budgeting an essential part of their strategic formulation and execution (Horngren et al 2016). 

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