Budgeting is one of the most important areas of company’s activity, being highly susceptible to challenges in the business medium. Thus, this report outlines the benefits from having a budget system, as well as the positives of the budget process to the development of the company. However, even traditional budgeting system has its negatives for the company; it does not inspire change, the method does not offer incentives, inspires expenses at any price, without the absolute necessity of performing them. Importantly, an analysis of the suitability of the incremental budgeting system within the context of the industry UniDate operates into has been made.
Table of Contents
i. How Unidate benefits from having a budget system? The budget process and the development of the company.
ii. Key areas of the business of UniDate that the budget needs to address.
iii. Traditional budgetary system whether or not it is appropriate for UniDate in its future form
iv. Rolling budgets, zero-based budgets and activity-based budgets.
v. Implication of the alternative budget systems in UniDate
vi. One budget method, or a combination of them will be most suitable for UniDate?
Objectives and Research Themes
This report examines the benefits and limitations of traditional incremental budgeting for UniDate and evaluates the suitability of alternative systems, specifically rolling, zero-based, and activity-based budgeting, to better align the company's financial planning with its strategic goals in a competitive global environment.
- Analysis of the strategic importance of formal budget systems.
- Critical review of the limitations inherent in incremental budgeting.
- Exploration of alternative methodologies for cost management.
- Strategic recommendations for budget system adaptation at UniDate.
Excerpt from the Book
ii. Key areas of the business of UniDate that the budget needs to address.
The incremental budget system used so far in the company has the following advantages:
• Its simplicity. In short that type of budgeting is very easy to understand and in comparison to some other types of budgeting this one is relatively easy to be implemented into UniDate.
• The period of gradual change. Seen from the company's perspective this type of budgeting guarantees stable budget from the previous to the current period (McLaney and Atrill, 2015). In some companies the latter is considered to be a positive as many managers feel threatened by the large budget increases from one period to another.
• It is conflict-avoiding. Using that type of budgeting Unidate avoids conflicts between the departments of IT facilities, staff, management, finance and administration.
Notwithstanding that fact, the incremental budgeting system also poses some threats to the company:
• It does not inspire change. Expenses and budgets running out as before are highly unusual in business; they are rather variable (Weetman, 2010).
• The method does not offer incentives. The latter is associated with the fact that UniDate staff does not have the room to be creative with an already imposed strict budget.
• Inspires expenses at any price, without the absolute necessity of performing them. The managers of the different departments are highly aware of the fact that the next budgets will be the same as the previous one, so they are using the funds to the utmost limit.
Summary of Chapters
i. How Unidate benefits from having a budget system? The budget process and the development of the company.: This chapter establishes the foundational benefits of budgeting, such as improved coordination, performance stimulation, and better control for organizational welfare.
ii. Key areas of the business of UniDate that the budget needs to address.: This section evaluates the current incremental budgeting system at UniDate, weighing its ease of implementation against its tendency to discourage innovation and efficient resource use.
iii. Traditional budgetary system whether or not it is appropriate for UniDate in its future form: The chapter argues that incremental budgeting is increasingly inadequate for UniDate due to its rigidity and time-consuming nature in a volatile, global market.
iv. Rolling budgets, zero-based budgets and activity-based budgets.: This chapter defines alternative budgeting models, highlighting how zero-based and activity-based approaches offer more precise cost control and strategic alignment.
v. Implication of the alternative budget systems in UniDate: An assessment of how specific alternative methods could be applied at UniDate, noting both the potential efficiency gains and the resource demands of these new approaches.
vi. One budget method, or a combination of them will be most suitable for UniDate?: The final section concludes that a hybrid approach is the most effective solution for UniDate to manage uncertainty and support expansion into new international markets.
Keywords
Budgeting, UniDate, Incremental Budget, Zero-based Budget, Activity-based Budget, Rolling Budget, Financial Planning, Cost Management, Strategic Alignment, Resource Allocation, Business Performance, Corporate Finance, Management Accounting.
Frequently Asked Questions
What is the primary purpose of this report?
The report evaluates current budgeting practices at UniDate and investigates whether alternative budget systems could better support the company's strategic goals and operational efficiency.
What are the main budgetary themes discussed?
The core themes include the limitations of traditional incremental budgeting, the strategic need for flexibility in competitive environments, and the mechanics of modern budgeting alternatives.
What is the central research question?
The research asks how UniDate can transition from a rigid, traditional budget system to a more adaptive model that aligns with its long-term strategic expansion.
Which scientific methods are employed?
The report utilizes a comparative analysis of financial management theories, applying concepts from recognized accounting scholars to the specific business context of UniDate.
What topics are covered in the main body?
The main body covers the advantages and threats of current systems, the mechanics of alternative budgets like zero-based and rolling models, and their specific implications for UniDate's departments.
What are the defining keywords of the work?
Key terms include budgeting, financial planning, resource allocation, and strategic management.
Why does the author suggest that incremental budgeting is potentially harmful for UniDate?
The author argues it is too rigid, time-consuming, and discourages innovation, which hampers UniDate's ability to adapt to unpredictable global market conditions.
How does the report suggest using a hybrid budget approach?
The report recommends combining elements of different budget systems to capture the efficiency of cost-benefit analysis alongside the flexibility of rolling forecasts to better meet the 2018 budget cycles.
- Arbeit zitieren
- Bachelor Silvia Stamenova (Autor:in), 2017, Benefits of a a budget system. Traditional budgetary Systems versus Rolling budgets, zero-based budgets and activity-based budgets, München, GRIN Verlag, https://www.grin.com/document/427077
