3 Better budgeting in recent years may have been seen as a movement from ‘incremental budg

Question

3 Better budgeting in recent years may have been seen as a movement from ‘incremental budgeting’ to alternative

budgeting approaches.

However, academic studies (e.g. Beyond Budgeting – Hope & Fraser) argue that the annual budget model may be

seen as (i) having a number of inherent weaknesses and (ii) acting as a barrier to the effective implementation of

alternative models for use in the accomplishment of strategic change.

Required:

(a) Identify and comment on FIVE inherent weaknesses of the annual budget model irrespective of the budgeting

approach that is applied. (8 marks)

Answer 1

正确答案：
(a) The weaknesses of traditional budgeting processes include the following:
– many commentators, including Hope and Fraser, contend that budgets prepared under traditional processes add little
value and require far too much valuable management time which would be better spent elsewhere.
– too heavy a reliance on the ‘agreed’ budget has an adverse impact on management behaviour which can become
dysfunctional having regard to the objectives of the organisation as a whole.
– the use of budgeting as base for communicating corporate goals, setting objectives, continuous improvement, etc is seen
as contrary to the original purpose of budgeting as a financial control mechanism.
– most budgets are not based on a rational causal model of resource consumption but are often the result of protracted
internal bargaining processes.
– conformance to budget is not seen as compatible with a drive towards continuous improvement.
– budgeting has an insufficient external focus.