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Weaknesses of Traditional Budgeting
Anneke Zwart, Student (University), Netherlands, Moderator
Fraser and Hope mention the main weaknesses of annual (traditional) budgeting that gave rise to the development of thinking beyond budgeting:
1. Time Consuming - Budgeting takes a lot of time. Average time needed for budgeting lies between two and four months according to the authors.
2. Costly - Despite developments of high quality and fast computer networks, the process of budgeting still remains to be expensive.
3. Useless - After visiting several companies, it appeared that many companies perceived the results of budgeting differently. Budget gave some companies more control, while in other companies budgeting was perceived as being unimportant and not meeting any needs.
4. Bureaucratic - The continuous pressure on prices of goods and services asks for decreases in structural costs and in bureaucracy.
5. Frequency - Initially changes in the competitive environment resulted in budgeting more often in a year, but its only result is a rising workload th...
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Budgets... They Have a Place But When Misused!
Donald Liveley, Teacher, United States, Member Budgets are about compliance (tactical) rather than the long term strategic and eventual survival and robustness of the enterprise.
I believe th... |
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Further Weaknesses of Traditional Budgeting
K.Narayana Moorthy, HR Consultant, India, Member - It is not oriented to long-term vision.
- If it follows bottom-up method it's tedious and if it follows (many a time) top-down method it's pain... |
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Waste of Energy, Causes Sandbagging
JC de Jong, Director, Netherlands, Premium Member Hello Anneke, I agree with your points and the two I would like to add are (one already being mentioned)
1. Lack of long-term visioning (budgets ... |
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Missing Process and Software Support
Istvan Szeman, Consultant, Hungary, Member One essential (and missing) building block is a well defined process and software support for forecasting budget positions, based on recent trends, co... |
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Weaknesses of Annual Budgeting
RUBEN ACOSTA, Manager, Mexico, Member Dear Anneke, you are just right in your observations. Dou you have any better way to improve this process? Is it possible to reduce to 50% of current ... |
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Lack of Process and Software..
Donald Liveley, Teacher, United States, Member The reason that processes and technological support is not as optimal as it should be, is the concepts/principled are not well conceptualized. Process... |
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Weaknesses of Traditional Budget, 3 Useless
Adam Mohammed Baba, Director, Ghana, Member Political interference as a result of political expediency also distorts implementation of traditional budget.
This is more pronounced in the eco... |
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Weaknesses of Traditional Budgeting
K.Narayana Moorthy, HR Consultant, India, Member I agree with Adam Mohamed Baba - budgeting must be of value of money. Basically, if the budgeting is based on activity calculations and activity costi... |
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Careful with the Effectiveness of Numbers
ADAM SAID, Student (Other), Member I think indeed numbers are effective tools for decision making, but the issue is the reliability of these numbers.
When the process for producing... |
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Weaknesses of Traditional Budgeting
Michael T Iorngurum, Manager, Nigeria, Member Your reasons are cogent (Editor: ~convincing). Particularly observations 3 and 4 (Useless, Bureaucratic). In a process manufacturing plant, they are e... |
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Weaknesses of Traditional Budget
K.Narayana Moorthy, HR Consultant, India, Member While it is agreed that a budget is important, it can not be simply followed in completion of work. Especially in a changing environment with high lev... |
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Special Interest Group Leader
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Beyond Budgeting
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