Flexible Budgeting System Is A Budget System Accounting Essay

On the other manus, another ground that I have agreed to this statement is because in my reseach, I have found that some of the companies which have tried assorted flexible budgeting system are able to assist the companies more easy to achived the concern end. However, some of the companies is utilizing the flexible budgeting system combine with other direction controls to go a strong strategic to pull off the uncertainness. The paper will discourse the causes of the economic uncertainness such as politcal factor, economic factor, societal factor and the rapid alterations of engineering that will truly impact the companies.

In add-on the paper will discourse if the companies do more flexible budgeting system it will besides acquire a batch of benefits such as have a better strategic planning, contolling, perfomance evaluating and etc, that it will discourse more inside informations in the organic structure of the coursework. A flexible budgeting system is a common budgeting system that usage by the company. A flexible budgeting system is a budget system which is designed to alter in conformity with the degree of activity attained ( Lohrmann, Glenn M 1989 ) .

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

Sometimes flexible budgeting system besides known as variable budget. The flexible budgeting system are complement the used of fixed budget, so they can use in more than one context. The differences between the flexible budget and fixed budget that is for fixed budget is based on original budget, nevertheless for flexible budget is based on existent end product. Honestly, the flexible budgeting system is much more utile for the company commanding, planning, perfomance rating and etc, if compared to others budgeting system.

The ground is because “ flexible budgeting system it is non confined to one degree of activity, so it can be tailored to any degree of activity within the relevant scope ” ( W. Steve Albrecht, James D. Stice, Earl K. Stice, Monte R. Swain 2008 ) . For illustration: if the company utilizing flexible budgeting system, so the company director can look at the existent consequence of the activity that attained, after that the director can find what costs should hold been at that gross revenues degree.

The undermentioned figure1 shows the illustrations of how the flexible budget plants. The Figure 1 is on following page. Why the companies required more flexible budgeting system? The first ground is because the economic uncertaity such as the political, societal, economic and rapid alterations of engineering factors ( Byars, L. ( 1991 ) and ( Kotter, J. and Schlesinger, L. ( 1991 ) , in a consequence of companies become unstable, so needs more flexible budgeting system to assist the companies become more efficaciously and efficienly. Harmonizing to Byars, L. 1991 ) , the causes of the economic uncertainness such as political factor which include revenue enhancement policy, trade limitation, employement jurisprudence and etc.

However, the economic factors such as the rising prices or deflation of the economic system, exchange rates and involvement rates. This factors will impact companies, so needs more flexible budgeting system to stable the companies. Harmonizing to Kotter, J. and Schlesinger, L. ( 1991 ) , the causes of the economic uncertainness such as the societal factors which frequently looks at the societal such as the population of growing rate, wellness conciousness and etc.

However, the rapid alterations of engineering will besides impact the companies such as the rapid alterations from the mechanization. This factors will impact companies, so needs more flexible budgeting system to stable the companies. The 2nd ground is because due to economic uncertainness so if the companies do more flexible budgeting system it will allows concerns to react rapidly to alterations and maximise the net incomes, because flexible budget is a public presentation direction tool that allows effectual direction control ( Jean Scheid Sep 25, 2010 ) .

However, some of the companies said or argued that budgeting system are progressively inappropriate for organisations wanting to accomplish high public presentation in competitory conditions and should be abandoned ( Hansen et al. ,2003 ; Otley, 2006 ) . Hope and Fraser ( 2003 ) . Although some of the companies said that the budgeting system is inappropriate or have some restriction, but most of the companies around the universe are still making budgeting system, the ground is because the companies need to achived the predicted fiscal public presentation and besides able to command the costs.

Due to economic uncertainness, it is more of import for the big companies to necessitate more flexible budgeting system. However, for a little companies it is besides of import but non every bit much as big companies. At now, the essay will speak about the instance survey for a big company that use budgeting system to development a more flexible manners of direction. In this instance survey, the big company that is called Astoria Plc. The Astoria Plc is a big, transnational, document engineering and services organisation and a taking participant in its sector ( Natalie Frow, David Marginson and Stuart Ogden ( 26 November 2009 ) .

Harmonizing Natalie Frow, David Marginson and Stuart Ogden, the Astoria Plc is operates in a extremely competitory, planetary market topographic point and characterised by rapid technological alteration. Therefore, the Astoria Plc is in a high degrees of economic uncertainness. So the Astoria Plc required more flxible budgeting system. The Astoria Plc is utilizing the flexible budgeting system to unite with other direction controls as a strategic to pull off the economic uncertainness. The Astoria Plc called this strategic as “ Continuous Budgeting ” system.

The uninterrupted budgeting system is a system which is enable the company directors to face with the unexpected events such as jobs or unexpected alterations in fortunes. Harmonizing to the Astoria Plc director has saying that “ things come along during the twelvemonth that you have non planned for, so you so have to set ” . Therefore, the uninterrupted budgeting that Astoria Plc are utilizing able to prioritize and besides have a alteration of programs and reallocation of resources in chase of strategic administration aims ( Natalie Frow, David Marginson and Stuart Ogden ( 26 November 2009 ) .

On the other manus, the uninterrupted budgeting besides enable the Astoria Plc to easy achived the company ‘s fiscal marks. In order for the Astoria Plc to make a uninterrupted budgeting system, each of the company departments must be bring forth the flexible budget every bit much as possible such as the fabrication, finance, supply concatenation, human resources, buying, gross revenues, merchandise development, selling section, and etc, so it will unite with the other direction controls. So this is the ground why the economic uncertainness required more flexible budgeting system.

The economic uncertainness will truly impact the companies, hence a batch of company had tried following assorted flexible budgeting system to stable their company. In my reseach, I have found that one of the company that have been tried utilizing assorted type of flexible budgeting system to assist its company more stable and efficiency. In this 2nd instance survey, the company names that is called HON Company. The HON Company is a office furniture maker. Harmonizing to ( Drtina, Ralph, Hoeger, Steve, Schaub, John 1996 ) , the HON Company saying that the one-year budget of the company is non see as an effectual control tools.

The ground is because the disbursals and income marks of the companies in the one-year budget is ever different from the existent consequences. Therefore, the HON Company had tried utilizing assorted type of flexible budgeting system to assist the house become more stable. Hence, the HON Company is tried to used assorted flexible budgeting system to get the better of this jobs such as implement a uninterrupted 3- month budget rhythm ( Drtina, Ralph, Hoeger, Steve, Schaub, John 1996 ) .

In this uninterrupted 3- month budget rhythm, there are contains 5 stairss process involves. In the first measure, the HON Company will make a gross revenues budget. In the 2nd measure, it will transform the gross revenues budget into a transportation agenda and works production. In the 3rd measure, the HON Company will merely make the disbursals budget. Then in the 4th measure, the HON Company will consolidate the budgets so compare with the strategic program. Then in the concluding measure, the HON Company will merely make a budget for the parent company.

If the HON Company tried used the assorted flexible budgeting system that is the uninterrupted 3- month budget rhythm, so the companies will acquire a batch of benefits such as utilizations this budget as an planning and commanding device to assist the house fullfill some concern ends and besides a strategic to pull off the economic uncertainness. The concern ends of HON Company such as quickly uninterrupted betterment of the house and quickly uninterrupted new merchandise or service development.

The companies must following more flexible budgeting system because it can convey a batch of benefits or advantages. The ground is because most of companies finance sections are ever under force per unit area cause by the clime of economic uncertainness. Therefore, the companies must following more flexible budgeting system to stable the company internal and besides external environment. Futhermore, it can besides derive a batch of benefits. The benefits for the companies following more flexible budgeting system such as have a better strategic planning ( William P.

Cress ; A ; James B. Pettijohn 2002 ) . Due to economic uncertainness, the companies must following more flexible budgeting system. Normally, the flexible budgeting system can be a utile tools before or after a specific period for the companies. Therefore, all the companies will fix the flexible budget at the start of the budget period to integrating different line values for different gross revenues projections, so it will besides go a utile planning tools, and assist respond to alterations in an external environment more efficaciously and expeditiously ( Jean Scheid Sep 25, 2010 ) .

In the economic uncertainness, it will ever hold some unexpected events that arise, so if the companies following more flexible budgeting system it would amount to a better startegic planning. Therefore, the strategic direction of the companies enabled to prioritise, as necessary, the alteration of programs and reallocation of resources in order to run into broad strategic organisational aims ( Natalie Frow, David Marginson and Stuart Ogden ( 26 November 2009 ) .

For illustration: An ice pick company have following a batch of flexible budgeting system, so the company have prepared a flexible budget based on awaited gross revenues for every possible fluctuation in temperature, and this will led to a better strategic planning such as aids to be after day-to-day staffing, purchases of milk and pick, production, and distribution degrees in progress ( Jean Scheid Sep 25, 2010 ) .

The benefits for the companies following more flexible budgeting system such as have a better direction and operational control ( William P. Cress ; A ; James B. Pettijohn 2002 ) . Due to economic uncertainness, the companies must following more flexible budgeting system to assist the companies have a more stable direction and operational control. The advantages of a flexible budgeting system that brings to the concern that is it allows the operational and direction have a greater degree of commanding.

Therefore, following more flexible budgets allows existent clip monitoring and control of existent consequences against budgeted consequences ( Jean Scheid Sep 25, 2010 ) . For illustration: Better control on natural stuff stock list, better control on agenda distribution, and set about other supply concatenation undertakings more efficaciously and expeditiously. The benefits for the companies following more flexible budgeting system such as have a better public presentation rating ( William P.

Cress ; A ; James B. Pettijohn 2002 ) . Due to economic uncertainness, the companies must following more flexible budgeting system to assist the companies have a more accurate public presentation rating such as have a more right or accurate camparison between budgeted public presentation and existent public presentation ( Jean Scheid Sep 25, 2010 ) . Therefore, flexible budgeting system is besides an utile tools at the terminal of the specific period.

To reason, the flexible budgeting system is a system that is it really of import for the companies in order to pull off the economic uncertainness. Therefore, the flexible budgeting system are able to assist the houses becomes more stable and more efficiency. Most of the organisation in the universe are utilizing flexible budgeting system to pull off the economic uncertainness, particularly the big organisation because it has more uncertainness such as high competitory, rapid technological alteration and etc.

However, little organisation besides utilizing it every bit good. In the essay chief organic structure, it described the two instance survey of the current state of affairs of the big organisation that utilizing more flexible budgeting system to pull off economic uncertainness. In the two instance survey, the companies that sucessful utilizing the flexible budgeting system to pull off economic uncertainness that is the Astoria Plc and HON Company.

The Astoria Plc is utilizing the flexible budgeting system to unite with other direction controls as a strategic to pull off the economic uncertainness, this strategic that is called the “ Continuous Budgeting system ” ( Natalie Frow, David Marginson and Stuart Ogden ( 26 November 2009 ) . However, the HON Company is utilizing assorted flexible budgeting system that is called the 3- month budget rhythm to get the better of the economic uncertainness ( Drtina, Ralph, Hoeger, Steve, Schaub, John 1996 ) .

On the other manus, the essay will decribed the benefits for the companies following more flexible budgeting system to pull off economic uncertainness. The benefits such as better strategic planning, better direction and operational controling and besides better or more accurate public presentation rating. Flexible budgeting system were identified a really of import system to pull off the economic uncertainness, hence economic uncertainness required more flexible budgeting system for the companies to stable it.