Advantages Of Traditional Budgeting

1. Traditional Budget

Budgeting is an essential and useful tool for every organization. Organizations’ relying on budget and budgetary system to attain goals are relatively high. As budget is a quantitative illustration of a recommended future strategy of action used by the management in order to assist the coordination and execution of the strategy, which usually lasts for a year. Not only does budgeting covers the financial aspects of the plan, it also considers the non-financial aspects and performs as an outline for the organization to achieve its goal in a planned period of time (Bhimani et al., 2015).

Every organization has plans and goals derived from organization’s long-term strategy and budgets are considered to be the main factors

In the budgeting process, the main advantages of traditional budgeting are planning, control as well as performance management.

Planning is a part of the long-term process, it compels manager to think ahead of the game as well as trying to anticipate potential issues and solutions. Planning is about achieving goals and objectives by determining the activities, every organization requires planning so that it can operate its different departments and segments effectively (Shim, Siegel and Shim, 2012).

Control is also part of the advantages of budgeting, control involves steps done by the management. Management ensures all members of the organization play a role in order to achieve the goals as well as managing the activities. Comparing actual results and budgeting amounts for different categories of expenses, managers then can determine which costs do not correspond to the plan and hence needed their attention (Lucey, 2002). Good budgeting comes together with both planning and control, however, management must pick which role is more appropriate to be emphasized on in order to get the full advantages of it (Flamholtz,

Criticism of Traditional Budgeting

In recent years, criticism towards traditional budgeting had increased tremendously. Despite the countless criticism towards the traditional budget, it is needless to say that it does somehow assisted business when it first created. However, the problems with the traditional budget could be summed up into categories, namely, time, people and processes related.

Time Related Criticism
Firstly, time-related problems are one of the most frequent issues in the criticism. Traditional budgeting and planning are a long process for every organization. However, bigger organization budget preparation will take even longer to process. Normally, the process may last for more than 31 calendar weeks. In other words, the main difficulty was with the time taken to prepare forecast information and by the time it is done, the information will be outdated (Ryan, 2007). As time goes, traditional budgeting and planning soon turned into a costly, time-consuming, offering limited opportunity to react quickly as well as its flexibility to changes. Eventually, budgets and plans no longer are appropriate for the existing conditions or more often, obsoleted before management’s approval. This obsolescence occurs from the long duration of negotiations or bargaining which usually involved in the process of planning and budgeting. Furthermore, disintegrating overall budget issue down to the lowest level requisite for detailed analysis consumes large quantities of monetary