Budgeting an Adequate Tool for Planning and Essay

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budgeting an adequate tool for planning and control in organizations and when should alternative approaches be considered? Is budgeting obsolete in the 21st century?

Starting with the last question first, although budgeting does seem to have its problems with it, and although it fails to produce results, nonetheless studies find that the majority of managers still turn to budgeting as means of conducting their business unable to surrender the system.

Criticisms against budgeting includes the following: (a) that they are too time-consuming; (b) that they are slow to detect problems; (c) that they are not reliable for performance management; (d) they are rapidly outdated; (e) the process lacks rigor; and (f) it disrupts cooperation.

Assessing, however, whether these factors persuade 21st managers to adopt replacement schemes, Libby and Lindsay (2007) discovered that more than 50% of the 212 Institute of management Accountants (IMA) members whom they surveyed in 2006 affirmed their reliance on budgets (in response to the question "budgets are indispensable we could not manage without them") with only a bit more than 10% disagreeing. IMA members were senior managers in for-profit organizations. Furthermore, whilst criticisms against budgets may have contained points of validity these criticisms were far from universal.

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Respondents not only indicated that budgets were indispensable to them but they chose to rather address and modify inherent problems than surrender the budgeting process.

An updated and expended survey conducted by Shastri and Stout (2008) in 2007 to 815 IMA members, provided similar results to that of Libby and Lindsay (2007). They discovered that the majority of respondents believed that the budget was either "very useful" or "useful' when used for general business objective although a small minority (10%) demurred. Problems were found in certain aspects f the budgeting system and in certain practices but most -- 77% in fact -- indicated that they believed that budgeting could be integrated into modern industrial practice. That banks amongst other businesses are taking this approach to apparently happy results was indicated by the research in With and Dijkman (2008) on Dutch banks who did not find the beyond budgeting approach useful and chose instead to institutionalize changes into current budgeting process. We may, therefore, conclude along with Libby and Lindsay (2007) that rather than budgeting being a disappearing phenomenon, it is an evolving and developing one.

Recommended future research for discovering reasons for dissatisfaction with budget and the context in which.....

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