Budget and budgeting

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  • Publicado : 14 de enero de 2012
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Nowadays, companies are in a constant battle against competitors trying to stretch performance as much as they can. In order to achieve top performance, it is important to have a good internal planof the business as well as comparison with the outside world. Business willing to achieve long-run performance should implement those kinds of measurements and not only concentrate on one aspect suchas the financial part. In the course of the years, it has been proven that Companies, and especially big organizations, have to play de roll of predictors of sales by taking into account internal andexternal aspects of the company and define expenses based on past outcomes. (Simons, 1995: 88)
A lot has been argued about the different strategic models in today’s businesses. These can be veryhelpful if implemented in the right way because they should be used to change the way organizations interact with customers. Example of the above mentioned models are the Rolling forecasts which “involvemore frequent forecasting by companies in order to generate more accurate financial predictions; therefore, they overcome many of the problems claimed for annual budgets, which have been the focus ofcritique to date”(Sivabalan, Booth, Malmi, Brown, 2009: 850). Budgeting has been criticized because of the complexity of its nature and the long periods in which it is calculated. This means that ifsomething goes wrong, it is not that easy to react and make a decision when applying the traditional type of financial measurement as the only tool. For this reason, as stated in Hopes and Frasersarticle, the rolling forecast could be an option for many organizations since it is calculated in a smaller period of time, usually each quarter, and it provides a likely overview of what the profit andcash flow will be. (Hope and Fraser, 2003:112)
Innovative strategic model, as stated in Hopes and Fraser article “Who needs Budgets?”, deal with the future instead of basing its operations on past...
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