Performance Management and Management Control European Accounting

Questions: More than likely, you are often required to work with budgets within your organization. Using the module reading and the Argosy University online library resources, research budgets including multiple budgets.Respond to the following: Describe in detail the budgets that you work with. In your description, what was the objective of the budget i.e., to motivate employees or control costs? (A budget could have more than one objective.) Was the use of the budget successful in achieving the objective? Based on the effectiveness of the budget, what recommendations would you suggest to improve the communication and/or utilization of the budget(s)? Assume your organization has multiple budgets and you are to work with these. Explain how these budgets should be linked together. Answers: For any given organization, the budget is one of the basic disciplines. This is because of the fact that it ensures that the resources are utilized in a manner that it maximizes the productivity and the profit of the firm. The strategies of the organization remain incomplete without the proper budget as it gives the forecast of the financial undertaking which should be subscribed by an organization. Hence, a definite budget approach must be adopted to an organization and thus it must use the available resources efficiently. The main aim of the budget is to establish best practices by means of setting high and accurate performance budget, management of expenses ensuring accountability and using comparative benchmarks (Hope, 2013). The best budget takes into consideration tools like the establishment of monitoring of the variances, balanced scorecard and setting up of corrective plans of action. The budget which one generally works within an organization determines the needs and wants of the organization by means of identification of certain goals. This ensures that the key agendas are addressed in the organization. One takes into account the available data which is required for the preparation of the budget. The budget one works with has been made effectively by means of information and data which is timely collected, is accurate and relevant. The budget also takes into account the various sources of revenues which the firm is expected to gain over a period of time. Thus, according to the sources of revenue, a certain amount is allocated to the various project in the organization (Waterhouse, 2010). The allocation of funds to various projects is decided on the basis of the feasible benefits and income it could generate to the organization. It has been seen in the various research paper that the budget of the organization doesnt have a single objective. In my case, the motiv e of the budget was to motivate employees and at the same time controlling the cost of the organization. By allocation of the budget to various department makes sure that employees are able to focus and work on the projects to which they are focused to. This makes sure that the employees are motivated on a regular basis as they are not forced to work on a project in which they dont have a peculiar interest. Thus, a budget focused on the objective of motivation provides a manager with an objective of aligning the work of the employees with that of the objective of the organization. At the same time, the objective of the budget was also to keep the cost of the firm under control. This was important because the firm has to take into consideration the future aspects and the growth path (Merchant, 2010). Thus, management of cost was also a crucial aspect of the budget. It is known that the costs and the revenue of the organization are impacted by the competitive and economic factors like changes in the requirements or expectation of the service user or changes in the government regulation. Thus, according to my perspective, an effective budget must completely be shielded with the impacts of the competitive and economic factors. The same could be done by means of establishing contingency funds on an annual basis from the budget. This fund could be used by the firm during the times of economic crisis when the firm is going through harsh times (Bourguignon, 2012). At the same time, one other aspect which a budget must take into consideration is that it must facilitate the function of coordinating and consolidating the actions of various parts of the firm and bringing them into a common objective of the firm. I believe this is crucial because it would compel the managers and above to examine the association amongst the various parts of the firm while t aking decisions and it would also help them to identify and resolve conflicts. Given the case that the organization is faced with a situation wherein it has multiple budgets then it is very significant for the managers to make sure that these budgets are linked together towards the common objective of the firm. A situation of multiple budgets in the organization could arise in cases where the firm has various departments or units. Thus, if the organization aims at linking the budget to the common objective of achieving the objective of the goal then it would help in using the resources of the organization in an efficient manner. In addition, the managers would be ensured by the fact that employees don't deviate from the common objective and are working towards the common goal in focus. Having multiple budgets would tend to create a situation wherein an organization would have multiple objectives. If different employees work on different objectives then it would result in an inefficient use of resources and would hamper the overall growth path of the organizatio n. Thus, it can be said that to run an organization effectively it is crucial to review both the sources of revenues and expenditure. Hence, a budget for an organization makes sure that the expenditure of the firm is limited and would let them use the available resources in the best way possible. Moreover, a budget tends to create a financial roadmap for the organization as they would have a set path they need to follow during the course of the business. A budget also ensures that the firm uses it as a tool of future growth of the business and expansion. If the firm saves the capital on the regular basis then it can take the risk of investing in ventures where there are possibilities of a higher return for the organization. At the same time, a balanced budget must also focus on rendering sufficient perks and benefits to its employees as it would keep the workers motivated. It is known that a motivated worker is expected to work more efficiently towards the achievement of the goals of th e firm and also working towards the accomplishment of their personal objectives. References Bourguignon, A. (2012). Performance Management and Management Control: Evaluated Managers Point of View. European Accounting Review. Vol. 13. No 4. pp. 659-687. Hope, J. (2013). Who needs budgets?, Harvard Business Review. pp. 108-114. Merchant, K.A. (2010). The Achievability of Budget Targets in Profit Centers: A Field Study, Accounting Review, Vol. 64(3), pp.539-558. Waterhouse, J.H. (2010). Budgetary Control and Organization Structure, Journal of Accounting Research, Vol. 13(2), pp.177-203.