The present paper purposes to highlight two most well known approaches to budgeting, specifically classical and zero-base budgeting. In last years there is much criticism blaming shortcomings of the both. However, such treatment seems to be biased without deep penetration in the nature of budgeting systems. The paper does not intend to summarise information about approaches to budgeting, but rather to explore system specific features that bring the shortcomings about. The paper is composed in the way not to contrast the approaches, that is to show the superiority of one of them, but to draw a profile of the approach with respect to selected criteria. The criteria, introduced in the first chapter, reflect major requirements to the budgeting systems from managerial point of view. They encompass integrity of budget allowances, adherence to strategy, impact on employees behaviour, flexibility and efficiency. Owing to scarce capacity the paper omits aspects specific to management and organization but still affecting the performance of the budgeting approaches. These are, for example, organization of planning process (bottom-up, top-down, etc), corporate culture, incentive structure, degree of activity formalization, management style, etc. The second and third chapter discuss instantaneously performance of classical and zero-base budgeting respectively. Analysis begins with brief description of most important features of the approaches and concentrates extensively on how respective approach meets the requirements. Finally, there will be discussed the most suitable type of production which makes up in part for disclosed shortcomings.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Chapter I. The Nature of Budgeting And Its Functions.
- 1.1. Definition of Budgeting
- 1.2. Requirements to Budgeting.
- 1.2.1. Integrity of Budget Allowances
- 1.2.2. Strategic Adherence of Budget Allowances
- 1.2.3. Prevention From Opportunistic Behavior.
- 1.2.4. Flexibility.
- 1.2.5. Economic Efficiency.
- Chapter II. Classical Budgeting
- 2.1. Brief Description of Classical Budgeting
- 2.2. Performance Profile of Classical Budgeting.
- 2.2.1. The Reach of Budgeting Process......
- 2.2.2. Alignment With Strategy
- 2.2.3. The Threat of Misuse.
- 2.2.4. Flexibility.
- 2.2.5. Economic Efficiency of Classical Budgeting.
- 2.3. Appropriateness...
- Chapter III. Zero-Base Budgeting
- 3.1. The Concept of Zero-Base Budgeting.
- 3.2. Performance Profile of Zero-Base Budgeting.
- 3.2.1. Integrity of budget allowances
- 3.2.2. Strategic Adherence of ZBB
- 3.2.3. Prevention From Opportunistic Behavior.
- 3.2.4. Flexibility.
- 3.2.5. Efficiency of ZBB
- 3.3. Appropriateness...
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This paper aims to analyze and compare two prominent approaches to budgeting: classical budgeting and zero-base budgeting. The paper aims to critically examine the shortcomings often attributed to both methods, exploring how they arise from the inherent nature of each budgeting system.
- Analysis of the fundamental nature and functions of budgeting
- Evaluation of the performance profile of classical and zero-base budgeting against key criteria
- Identification of the strengths and weaknesses of each budgeting approach
- Discussion of the suitability of each budgeting approach for different types of production
- Focus on the impact of budgeting systems on employee behavior and organizational efficiency
Zusammenfassung der Kapitel (Chapter Summaries)
Chapter I examines the definition of budgeting and explores its functions. This chapter outlines the characteristics of budgeting and its role in guiding organizational decisions. The chapter also delves into the various functions of budgeting, including motivation, coordination, and communication, highlighting its impact on various aspects of management.
Chapter II focuses on classical budgeting, providing a brief description of its core features. This chapter analyzes the performance profile of classical budgeting, examining its effectiveness across a set of defined criteria such as alignment with strategy, prevention of opportunistic behavior, and flexibility. The chapter concludes by discussing the appropriateness of classical budgeting for different types of production.
Chapter III explores zero-base budgeting, defining its concept and analyzing its performance profile. This chapter assesses the effectiveness of zero-base budgeting against similar criteria as classical budgeting. The chapter investigates its advantages and disadvantages, including its impact on employee behavior and organizational efficiency. It concludes by discussing the appropriateness of zero-base budgeting for different types of production.
Schlüsselwörter (Keywords)
The paper focuses on budgeting approaches, including classical budgeting, zero-base budgeting, and their respective shortcomings. It examines the impact of these approaches on organizational efficiency, employee behavior, and production types. The paper also explores the importance of aligning budgeting practices with strategic objectives and mitigating opportunistic behavior within an organization.
- Quote paper
- Dipl.-Kfm Roman Hinka (Author), 2005, Budgeting: Approaches and shortcomings, Munich, GRIN Verlag, https://www.grin.com/document/40301
