Essay by Bereketeab Yacob Yohannes
Budget and budgetary control has being dealt with in different ways in literature, but basically there has being critics on traditional budgetary control as new issues raised with current more unpredictable global internationalized world markets.
Virtually conventional budgeting has roughly some categories of criticism, one being that budgets by the time they are used their assumption are out-dated especially in rapidly changing environments, the second recurrent criticism is that conventional budgeting has vertical command and control structure that hinders initiative valuing more cost reduction rather than creating values.
The traditional way of budgetary control has a highly centralized command-control approach to budgets, this approach has in time shown it was not cost effective, time consuming, has very little use in forecasting in actual organization performance evaluation although it is highly long term performance oriented, and some times it can lead to dysfunctional behaviours of mangers and budget games.
Traditional budgeting has, also, shown that long term inflexible planning has in time proven to be ineffective as it outlives the objective of budgeting, it responds slowly to market shifts, it makes information sharing between different departments of the same organization difficult. Moreover it impedes the allocation of resources to their best uses.
The shortcomings of conventional budgeting has being dealt with in time buy different organization, and there has being proposed two practice-led approaches, in overcoming the shortcomings of traditional budgetary process, these two approaches has being proposed by two different regional department of the same organization, the CAM-I. The first approach proposes improving the budgetary process trough improving the data collection making budgets based on activity models with detailed financial model, this approach is being called Activity Based Budgeting...
Please join StudyMode to read the full document