Computerized Budgeting

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  • Topic: Document management system, Budget, Budgets
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  • Published : January 25, 2012
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Computerized Budgeting
MGMT 360

Budgeting has been a major part of forecasting how companies spend their money throughout the fiscal year. In most companies, the words “it’s budget time”, strike fear in the hearts of employees. Financial officers and management accountants brace themselves for reconciling reams of spreadsheets that may reveal wildly different data depending on order and configuration. Non finance employees in various divisions scurry to understand their role in the budgeting process and struggled to pull together the facts and figures they hoped would appear attractive to management. Traditional budgeting was carried out on a pad and pen, archived in countless journals and ledgers and often stored in boxes and crates. Retrieval was a difficult task. Today, computerized budgeting (E-Budgeting) solutions have streamlined and transformed the budgeting process at all levels of an organization. This research will show the factors that contribute to every day individuals to government; that are now using E-budgeting for accurate budget and bookkeeping strategies. Before the days of calculators, computers, and the internet, companies had to budget their finances the old fashioned way. Many accountants had to have countless ledgers, journals, and books filled with the next fiscal year’s projections. At the end of the year they had to go back and reconcile all figures and see what they could do to make the next year even better. This was a very demanding task, since all they had to use was scratch paper, abacuses, and lots of ink. Since technology was not yet able to provide ease to these tasks, the actual task of budgeting and bookkeeping was costly and largely ineffective.

Traditional budgeting had many problems. Many employees of companies were unaware about what the company needed in order to make the budget work. With many employees not knowing what information was important and what wasn’t, many budgets and forecast tools were inaccurate. Another weakness was that historical data and past budgets were harder to access. Steve Hornyak of Management Accounting Magazine explains: “The biggest drawback of traditional budgeting systems is the inability of participating individuals to access and use historical data during the budgeting and planning process. In fact, employees or managers attempting to allocate their sliver of the company funds often work in a vacuum. Without access to historical budgeting information, creating a budget from the ground up or making alterations to the existing budget may become tedious -- and sometimes futile -- tasks for nonfinance users” (Hornyak, 1998). With employees unable to contribute true validity to the budget and the key historical data missing, bookkeeping was quite difficult.

Another stumbling block traditional budgeting presented became obvious when separate departments or different regions within a parent company would try to pool their records together. All figures and numerical records were united and the CFO would make a final projection. However, if one department’s figures were off or slightly miscalculated, the company’s budget as a whole was inaccurate. Companies knew that something had to be done. Ian Henderson of Management Accounting Magazine states: “The majority of the problems encountered with budgeting arise from managing the process itself…The choice for large [organizations] is either to loose many of the undoubted benefits in planning and control offered by budgeting or to apply a software solution to the process and make it less troublesome, less costly and more effective” (Henderson, 1997). Computerized budgeting allows departments using the same program, to bring all figures into one general location, saving countless man hours. With the introduction of advanced data-entry techniques, the undertaking of budgeting each year became easier and easier. Computers helped add and subtract much faster and more accurately, so entering...
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