Properly focusing the planning process on the organizations' strengths and weaknesses will help the organization to achieve its strategic and financial goals. A critical part of this strategy includes the budgeting process. According to the text "A budget quantifies future financial plans and budgeting is the process of planning, in financial terms, the organization's activities and the results of those activities" (Marshall 2004). Some of the purposes of budgeting include helping to plan work effectively, assisting in allocating resources, and aiding in controlling resources during the budgeting period. Moreover, it is important to understand that a budget is developed to insure that management is working toward the same goal, with a knowledge base of the organizations' resources and constraints. Although strategic planning, budget forecasting, performance analysis are inclusive operations of the budgeting process; it is ultimately up to the financial analyst to determine whether the budget is guiding the company toward the achievement of its goals.
Sometimes inefficiencies result due to poor integration of the finance and strategy. "Budgeting and performance are typically overseen by the finance department, whereas planning s coordinated by strategy department. Often, the two processes aren't well integrated, resulting in strategies that are often dictated by the budget process instead of vice versa" (Gary 2003). The reason for this could be that everyone involved may be attempting to accomplish the same goals, but also trying to make sure that the outcome will be beneficial to them, such as a substantial bonus or a reward. Although many companies implement this reward theory in an effort to increase organization effectiveness, this theory does not always work. According to Aranya, "participation may create intrinsic valences due to a tendency for individuals to become "ego" involved in decisions which they have contributed, and this... [continues]
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