Participative Style Of Budgeting

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b) To compel planning
Budgeting makes sure that managers plan for the future, producing detailed plans in order to ensure the implementation of the company’s long term plan. Budgeting makes managers look at the year ahead and consider the changes in conditions that might take place and how to respond to those changes in conditions.
c) – To co-ordinate activities
Budgeting is a method of bringing together the activities of all the different departments into a common plan. If an advertising campaign is due to take place in a company in three months’ time, for example, it is important that the production department know about the expected increase in sales so that they can scale up production accordingly. Each different department may have its …show more content…

The budget helps to work out how these objectives can be achieved.)

k) Discuss the concept of a participative style of budgeting in terms of the six objectives identified in part ((marks)

Participative budgeting is a budgeting process under which those people impacted by a budget are actively involved in the budget creation process.
It refers to a budgeting process where there is some level of involvement from subordinates within the organisation, rather than budgets just being set by the top level of management.
Concept of a participative style of budgeting in terms of the objectives identified in part (a) above
– To compel planning
Participative budgeting will compel planning. Although participation can take many forms, often it will take the form of bottom-up budgeting, whereby the participation starts at the lowest level of management and goes all the way up to the top. If this is the case, then planning is taking place at many levels, and should be more accurate than if it simply takes place at a high level, by individuals who are not familiar with the day to day needs of the business.
– To co-ordinate …show more content…

This is because, not only does there need to be co-ordination between departments but there also has to be co-ordination between the different levels of management within each department. The process should be cumbersome but also effective, with everyone knowing exactly what the plan is.
– To communicate activities
Communication will be particularly effective with participative budgeting, although how effective depends on the extent of the participation. If all levels of management are involved, from the bottom up, then all levels of management know what the plan is. However, the plan may change as different departments’ budgets are reviewed together and the overall budgeted profit compared to the top level management’s expectations. Hence, it may be the case that those people involved in the initial budgets, i.e. lower level management, have to deal with their budgets being changed.
– To motivate managers to perform well
If managers play a part in setting the budget, they are more likely to think that the figures included in them are realistic. Therefore, they are more likely to try their best to achieve them. However, it may be that managers have built budgetary slack into their budgets, in an attempt to make themselves look good. Therefore, managers could end up performing less well than they would do had tougher targets been set by their

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