I disagree that budgeting is an unnecessary burden on many managers to some extent. This is because budgeting is a necessary detailed plan that indicates the future revenue inflows and the outflow of expenses over a period. It is usually expressed in quantitative terms and it enables managers to make better plans for the future. There are various accounting standards, which govern a certain entity. In the United Kingdom, they have accounting policies and practices, which are issued by the accounting bodies from both within and outside the state. Thus, budgets consume managers’ time but they are the necessary tool for future planning and allocation of resources thus enables the organization to achieve their objectives.
Budgets provide an opportunity to re-evaluate existing activities. This helps managers to plan for the future needs and estimate the profits targeted. Budgeting for the future is crucial especially when focusing on sales. However, there are factors that are considered when estimating sales. These factors include the sales pattern, advertisement, sales promotion and market research (Baker, 2008). A good budget foresees what will happen in the future. In the UK, financial policy makers implemented policies that ensure the financial markets are well informed and organizations allocate resources well. The standards protect the investors globally and enable the organizations to develop a good global financial reporting.
They provide a means for communication within the organization. Budgeting is essential for managers because it will enable managers to communicate on important matters in the organizations (Shaikh, University of Manchester, Manchester Federal School of Business and Management, 2002). Budgets act as a road map for growth and development of a company. The UK accounting standards are significant to the development of high quality global financial reporting. The standards are shaped primarily to help organizations meet the requirements of those who participate in the capital market. Thus, in order to meet the international accounting standards, budgets should be well formulated by managers to help them determine the inflow and outflow capitals (Rutherford, 2007).
The process is vital because it can help to uncover the potential bottlenecks before they occur. Budgeting enable managers to realize those financial problems that may arise before it is too late. Among the roles of managers in an entity, management of assets is crucial. Therefore, in order for them to manage their organizational accounts, they should adopt a better budgeting plan. This will enable them to determine if their organizations are developing or they are not. The UK government works with other security regulators globally to encourage organizations to adopt the required accounting standards in managing their institutions.
They provide means of allocating resources to all sectors in the organizations. Resource allocation is one of the challenging issues that many companies undergo. In order for an organization to operate efficiently, a budget should be formulated periodically to determine where they could be used effectively. A budget will enable managers to distribute or allocate resources efficiently to all sectors (Great Britain, 2009). This will enable the organization to meet their stated objectives and goals. The United Kingdom provides high quality accounting standards that identifies organizational issues internationally. They audit firms and provide quality controls globally.
However, to a smaller extent, budgeting takes time away from important daily activities. This is because many managers would spend most of their time dealing with daily emergencies (Dugdale, Jones, Green and Chartered Institute of Management Accountants, 2006). Consequently, budgeting is seen as a pressure device imposed by management thus it can lead to problems such as labor relations and inaccurate record keeping. This is why some people see budgeting as unnecessary burden on many managers. In addition, it leads to departmental conflicts because of pressure imposed by management. Thus, bad labor relations, inaccurate record keeping will arise. This will contribute to problems such as poor management and difficultness in achieving corporate goals. However, its importance is greater as compared to its negatives; hence, it should not be assumed to be an unnecessary burden because it helps a lot in saving those day-to-day problems.
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Dugdale, D., Jones, T. C., Green, S., & Chartered Institute of Management Accountants. (2006).
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Great Britain. (2009). Maintaining financial stability across the United Kingdom’s banking
system. London: Stationery Office.
Rutherford, B. A. (2007). Financial reporting in the UK: A history of the accounting standards
committee, 1969-1990. London: Routledge.
Shaikh, R. A., University of Manchester., & Manchester Federal School of Business and
Management. (2002). Post acquisition accounting practices in the UK. Manchester: University of Manchester and UMIST.