They following steps include - Communicating details of the budget policy: Information regarding the budget will have been set out previously as part of a long-term planning process. This is the beginning of the planning and budgetary process. Top management of organizations must communicate the effects with those who are planning, conducting and setting out the yearly budget. As well as this other significant changes and procedures should be quantified. For example changes in sales, productivity, changes in industry demand and output.
The greatest impact of money on productivity and performance is in jobs where performance is directly related to compensation. For example, the knowledge of receiving a bonus after achieving a certain sales quota will likely motivate a salesperson to increase productivity.” I think this is a great example and a great reason why compensation is so important to motivate employees. When a employee feels as if he is working for not only the greater good of the organization but will also be recognized for his ongoing hard work, he will be motivated more to succeed. It brings a greater level of passion towards in organization, which directly leads to greater success from both the employee and
Budgets occur in varying natures ranging from those that are static to those that are flexible. Static budgets are easy to work with. However, flexible budgets are more efficient and they ensure that every opportunity is utilized and therefore profits are maximized. Flexible budgets are adopted by many enterprises that aim at maximizing profits. As a matter of fact the overhead allocations applied in a flexible budget help the most vibrant departments of a business to earn more support hence maximizing profits too.
Spending pressure, patterns and budget areas and so on serve as a starting point on the subject of execution of budget spending. On the other hand, modification takes care of reprogramming, which shifts the financial areas within priority based tasks. Also, increase or decrease in salary, promotional activities, commission, grants, welfare tasks and so on do have a role to play in this category when it comes to the execution of budget spending in the business domains or at an organizational level (Dees & Paul, 2004). In the same way, reporting consists of presentation of the written financial records, published at the different periods. Hence, talking about the personnel budgeting with regard to execution of budget spending, the miscellaneous junctures of the budget execution process, responsible person’s finding, budget’s appositeness, expenditure, and governance and so on are some of the crucial factors, which are considered
However, budgeting can play a much more important role than simply limiting spending. Budget is a familiar and very important type of short range plan that is expressed in a numerical terms how the resources of a company can be distributed to attain a desired profit. A budgeting system is one of the oldest instruments of a management control system. Since prepare a budget force a company to determine how much money will be coming in and cost will be incurred, it serves a dual purpose to become a controlling as well as a planning operation. There are many examples of seemingly healthy businesses that failed because managers did not prepare budgets that would have identified problems in future or they failed to monitor and adjust budgets to changing conditions.
Clowes & Scriven (2011), Dutta (2009) and (Lal, 2002) have stated that budgeting is based on estimates and assumptions. Therefore, the quality of these estimates are crucial for an effective budget and thereby, budget has an inherent risk if the estimates are inaccurate. Another limitation is that budgeting process is costly and time-consuming. For instance, the cost of data collection for budgeting and time of the staff spent for planning. Therefore Clowes & Scriven (2011) suggest the management must confirm the benefits before implementing a budgeting system.
The budget may express all resources in monetary amounts, or may show money and other resources – such as staff hours. A monetary budget is often used to establish the current cost variance of the project. To establish this we need: a) The Actual Cost of Work Performed (ACWP). This is the amount spent on the project b) The Budgeted Cost of Work Scheduled (BCWS). The amount that was budgeted to be spent to this point on scheduled
They are known as goal congruence, performance evaluation, autonomy and motivation. Goal congruence is one key success factor if an organization is to achieve its goals; including profitability (Harrington, 2007). In terms of promoting goal congruence, the transfer price is advantageous to the well being of the organization to achieve practicality for performance evaluation together with profit maximization as it can have a material impact on a company’s financial statements regardless of the organizarion’s size and style (McKinley and Owsley, 2013). Additionally, the transfer price sustains a high level of autonomy for divisional managers in decision-making so as to enhance managerial motivation as (Sisodia and Das, 2013) stated that besides improving motivation, autonomy is also a key to the success of the organization. In an organization, many foreign affiliates are considered as profit centers and the managers’ monetary rewards such as bonus are extremely dependent on the profit of their subsidiaries.
Including the project management office in the small projects increases complexity and costs for the client. As well as, time is increased due to controls placed by planned approach. Detailed planning: While detailed planning is an advantage, sometimes organization tends to get involved with too much detailed planning and it impacts the project. No or little Agility: Changes are welcome only till planning stage, any deviation or requirement change after that stage must go through cumbersome change management process. It assumes that requirements are not changed frequently which is not true especially for the software project management.
Cost management is known as a process that plan and control budget of any businesses made by an organization. It is also a form of management accounting that helps a business to predict the future expenditures and reduce chances of spending over the limit that has been planned in the budget. It is usually the most challenging tasks for officers whom are experts in accounting and finance because they have to think of the expenditures and benefits of it in a long-term period. Also, we can never predict the economy stability and circumstances. Moreover, it is challenging because having a good budget is known as an essential to any development of an organization whereby having drawbacks in planning a budget may be number one factor of why an organization