The Nature Of Budgeting Process

Estimates are quantitative long-term plans that can be measured with certain corporate goals set for achievement in a given period of time. The annual budget is usually divided into sub-plans typically every quarter and based on an annual strategic business plan. It is formulated by following processes that require careful analysis and evaluation of organizational objectives, alternatives, strategy choices, decisions and actions and objective execution and monitoring of results. The comprehensive nature of the budget process requires the involvement of managers and executives who are responsible for actual operation planning, activity coordination, plan communication to the center of responsibility; encouraging managers to achieve budget goals;

The study of Drury (2004)shows that the conventional annual budgeting process is a defined and approved plan to determine the actions and activities to be carried out within a certain period of time by using a certain amount of resources to achieve the objectives given. This process deals with the projection of activities, contingencies, strategies and process interactions within the organization. The budget also controls the planning process to ensure that the organization does not deviate from financial and operating goals. These activities and processes require a thorough analysis of the organizational processes; plans for targets to be achieved by each department and by the whole organization; and expected results can be achieved and beyond. Therefore, one observe that the annual budgeting process is a complicated and boring process that requires the highest management direction and lower managerial participation. Not only this but according to Jeremy Hope and Robin Fraser (2003) the traditional budgeting process takes four to five months to complete and 20 to 30 percent time

Pressure to convey as manager and Harapan team and Fraser (2003) team focus on sales target; order customer orders whether they want or not; and achieve financial goals. There is little time for managers to concentrate on team building; motivation; performance level; assessment; or even time to design effective and productive positions to achieve better results. Therefore, the budgeting process tends to motivate managers to set their goals for financial and achievement purposes rather than working as a team. Hence managers are temporary guards of team members forced to be separated from organizational