Use of Budgeting as a Management Technique for Managing Resources

This article discusses the use of budgeting as a management technique for effectively managing resources in organizations. It explores the budgeting process, including steps such as updating budget assumptions, obtaining funding, costing, and creating a budget package. The article also examines two major approaches to budgeting - top-down and bottom-up - and their impact on planning, controlling, and performance evaluation. Additionally, it highlights the importance of digitization in the budgeting process and its effect on satisfaction with the budgeting process.

Use of Budgeting as a
management technique
for managing resources
1

Abstract:
Budgeting is a very important activity and function of managerial accounting that is part of
over organisation and used by every organisation for allocation of different available financial
resources across various functions. Budgeting is not a one-step activity but it is a procedure that
consists of several steps that are used for proper allocation of funds for different activities. There
are various activities that have to be compulsorily performed by the top management and are
related to how these are going to affect or other functions performed by workforce. There are
some suitable standard that have been laid by organisation and according to that all the functions
of budgeting are performed. Organisations across the world are adopting the standard to properly
follow all the guidelines that are related with preparation of budget and dealing with all the
approaches related to in appropriate manner.
2

Table of Contents
Abstract:...........................................................................................................................................2
Introduction......................................................................................................................................4
1) Brief discussion of the process of budgeting................................................................4
2) Budgeting process satisfying the purpose of planning, controlling and evaluation of
performance............................................................................................................................7
3) Two major practises adopted by organisation such as top down budgeting approach and
bottom up budgeting approach...............................................................................................8
4) Critical evaluation of the traditional budgeting practises as a constraint on energy, time
and creativity on formulation of budgets................................................................................9
5) Recommendations of budgets for contemporary organisations for activities such as
planning & controlling.........................................................................................................10
CONCLUSION..............................................................................................................................13
REFERNCE...................................................................................................................................14
3

Introduction
Budgeting process is a very important management technique that is used for management
of the available limited resources by various organisations. Present report is based on a selected
journal article person of the budgeting process and how is it satisfying the purpose of planning
controlling and the overall evaluation of performances (Al-Mutairi,., Naser, and Saeid, 2018).
Further, there is usage of top down budgeting and bow down up budgeting as two major
approaches for the purpose of preparation of budgets. The present report is based on the topic as
a result of use of the journal paper “Digitisation of the overall budgeting process and various
determinants that is usage of business analytics and his overall effect on satisfaction of the
budgeting process.”
Based on the findings there is critical evaluation of the traditional budgeting practices and its
effect on the creativity, energy spend on the formulation of water is better to be utilised on other
different activities that are very important for every business organisation. Lastly, there are some
of the recommendations that are related with how contemporary organisations can make use of
different activities related to planning and controlling for achievement of their specific business
objective.
1) Brief discussion of the process of budgeting
Budgets are many times criticize because of the high time consumption and cosmetic related
with preparation of such method. There are many alternative related to non budgeting techniques
but the current advances that are taking place in Information Technology has led to more lasting
differences and increase in the ways for accounting and gender and budgeting in specific. There
is more data driven decision making approach that is used nowadays by organisations. Business
analytics is a tool that is very important part of the overall digitisation of the process of
budgeting examine the overall effectiveness of business analytics is journal that have been used
for the preparation of this report is based on the potential determinants of how German
companies are using overall business analytics in their budgeting process. Research it has been
conducted that there is a no much Association between the budgeting with the overall business
analytics but there has been a significant Association that has been agreed by majority of the
organisation related with the budgeting process to associate with the greater use of business
analytics.
4

Budgeting process:
According to view points of Martin Luenedonk, 2015 Budgeting is a basically detailed
procedure that consists of some of the intricate steps that help in understanding it in a better
manner as discussed below. The below mentioned points are related with the traditional methods
related to preparation of budgets that is used by many organisations (Budgeting Process:
Complete Guide, 2015):
Updating of budget assumptions:
Budget have to be always prepared based on certain assumptions. These emissions are
based on the particular Trends of sales and cost trends. Before preparation of a budget such as
assumptions have to be thoroughly reviewed according to the present environmental conditions
(Bergmann, Brück, Knauer and Schwering, 2020).
Available funding:
There can be a big Hunter for growth of project that is limited funds available. Therefore
while preparation of budget. Proper and tension has to be given to the availability of fund and
then investing according to search for determination of the viability of a particular project.
3) Steps costing:
Business environment is completely dynamic and it concept of various challenges
according to the changes in the overall cost structure (Cokins, and Dybvig, 2018). Budgeting
process consists of these factors that can affect the costing for a business organisation that have
to be closely considered.
4) Creation of a budget package:
In a budget package all the standards related with the budgeting process has to be taken
into consideration in order to formulate a budget for the presently. Previously develop standards
have to be updated and these have to be considered according to search up gradations. Budget
packages are the outlines according to which budget has to be prepared.
5

5) Obtaining the forecast of revenue:
There is a fact that says budget is one of the most usual budget and all these budget are
based on the sales budget. Budget is used for determining the business and generation of enough
revenue for the survival of a business proper attention have to be given to prepare the sales
budget by forecasting of the demand.
6) Obtaining department budgets:
The department budget helpful in reaching to a budget expenditure for a define budget period.
Department has to prepare their own budget and then all of these are combine to prepare a master
chart (De Souza, . and Lunkes, 2016).
7) Validating the compensation:
Compensation plans are very significant component of the whole budgeting process.
Compensation is basically related to annual increase and must be prepared with adequate care.
The approval for compensation has to be taken by the top management and then it has to be
augmented in the overall compensation plan.
8) Validating bonus plan:
Maintaining the employee morale bonus has to be frequently provided to motivate them.
Different type of Bonus plans have to be considered in the bonus plan.
9) Obtaining the capital budget request:
Capital expenditure is related with the expansion of business it is helpful for a business to avail
the overall opportunities important for business growth. Any type of capital expenditure plans
must be taken in advance and must be included in the budgeting process (Grossi, Reichard, . and
Ruggiero, 2016).
10) Updating of the budget model:
Changes that are made in the assumption of overall budget model must be updated and
then final budget have to prepared.
6

11) Review the Budget:
The overall budget prepared has to be presented to top management. The top
management basically evaluates whether the whole project is prepared according to the desired
sandals and requirement and then it is finally approved after any necessity changes on
modification.
12) Obtaining approval:
The budget has to be presented by the top management and after that their approval has to be
obtained (Kamau., Rotichand Anyango, 2017).
13) Issuing the budget:
Prepared has to be formally issued after it has been approved by the top management. All
the operations and functions are then taken according to the necessity requirements mentioned in
the whole budget.
Above Discussed are some of the necessity steps that are part of the overall budgeting
process. These are some of the traditional budgeting techniques but apart from this there is
requirement to use the digitisation of budgeting techniques because of high amount of limitation
that is present in these budgeting techniques according to the research that has been done in the
journal paper “Digitisation of the overall budgeting process and various determinants that is
usage of business analytics and his overall effect on satisfaction of the budgeting process.”
.
2) Budgeting process satisfying the purpose of planning, controlling and evaluation of
performance
Budgets are very important tool for short term and long term planning activities in every
organisation (Kasdan, and Markman, 2017). The organisations are involved in making the
decision about different alternative courses of action and then allowing them to reflect on the
operational capacity utilisation. Budgeting is used both for the operational and strategic functions
the potential benefits of digitisation are more for organisation as it is more Apparent in the
operational functions of budgeting as compared to the strategic function. The present research
clearly indicates that there has been a complete association with the procedure of digitisation of
7

the budgeting process. The overall aspects of planning, controlling and evaluation is connected
with this impact of tools on digitisation and is discussed according to various important apscest
mentioned in the journal. There has been a detailed link with how Research identifies that there
are three major functions of operational budgeting that is planning controlling and evaluating.
1) Function of budgeting is referring to the development of different plants. It consists of
coordinating the resources according to the units of organisation and for the formulating the
action plans. After that there is determination of expected cost according to the price floor and
then there is encouragement of innovative behaviour. The planning function is developed from a
budgeted based performance evaluation so that for the accuracy have to be reflected according to
equality of predicting the changing circumstances. It must not include the motivating and
evaluating considerations. While providing the estimates managers have to make prioritising the
overall evaluation of budgeting meaning of the information because of the conscious and
evaluation focus (Lopez, ., 2019).
The controlling function of a budgeting process is regarded as a important function related with
the overall board of directors who are attending to make the use of budgets as a monitoring
device. budgets are a tool of controlled the cost that are provided to directors in organisation
The controlling function is totally independent as compared to predicting future development and
also is a less time consuming process. The overall advantages of business analytics have to be
material use according to the control function it helps in preparation of annual budget according
to the controlling function of all financial activities in the organisation.
Evaluation function is also a very important part of budgeting activities and is regarded as a
budget based performance evaluation. Performance evaluation can be applied to both
organisational units and individual and it is divided based on business unit evaluation and staff
evaluation (Lumbantoruan, and Mulyani, 2019). This is a type of distinction that is useful for
highly volatile and dynamic environment where companies might refuse to use the budget for the
purpose of evaluating the employee but them still willing to understand the business unit is
performing according to the specified budget. The present research is focusing on the staff
evaluation function and it is a great importance as it helps in dealing with conflict taking place
8

between subordinates and superior. They are following a particular line of resource and the
major focus is on evaluating the staff function.
3) Two major practises adopted by organisation such as top down budgeting approach and
bottom up budgeting approach
Budgeting is an activity that can be done in variety of ways and it is very necessary to make a
smart choice so that the best way can be adopted by organisation for the process of budgeting the
two most important approaches of budgeting as normally adopted by many organisations’ are
discussed below:
Top down budget:
The top down budgeting is the primary input that is used by the top level executives of a
business organisation. The acceleration of a certain organisation hierarchy is laying down all the
guidelines that are required according to which budget has to be made. It is used for the purpose
of Alkaline in the overall financial goals required for maintaining a budget. Further guidelines
related to sales budget and compensation is provided by the top management. All over
management has the least amount of in the overall budget in process and they have to just
execute the overall guideline.
Bottom approach:
This is another approach of budgeting that is adopted as a inclusive approach towards the
overall budgeting process (Lund and Juujärvi, 2018). In this the upper level management has to
provide the guidelines related to budget lower management and employees have to formulate the
budget. Equation of organisation has to form the budget in according to the general guidelines
date of the organisation is formed by combining the overall budget of each vision individually.
The bottom up approach is used for the budgeting process is very inclusive in nature. This is
because of the fact that employees are participating in building a budget and they have to
understand the budget has to be acceptable.
9

In the present report there is a survey that has been done according to the journal paper
based on the topic “Digitisation of the overall budgeting process and various determinants that
is usage of business analytics and his overall effect on satisfaction of the budgeting process.”
And there has been a detailed research conducted that major German companies are used in
the top down approach in which top level executives are leaving the overall guidelines and
rules according to which different aspects of the traditional budgeting process have to be carried
on. These guidelines are laid down in order to assess the overall work force on how they have to
all the strategies to achieve effectiveness in the overall business processes and allocation of the
limited resources with the organisations. Researches based on the employees who were working
in the finance all the management accounting department of such organisation and 75% of the
total respondents said that they are performing the executive function that is execution of all the
instructions that are provided to them by their top management (Digitization of the budgeting
process: determinants of the use of business analytics and its effect on satisfaction
with the budgeting process, 2020).
4) Critical evaluation of the traditional budgeting practises as a constraint on energy, time
and creativity on formulation of budgets.
While talking about the traditional budgeting practices it can be said that there is the way
organisations are now focusing on budget formulation. From the present literature review and
journal article Digitization of the budgeting process, also it can be analytics and digitisation of
the overall budgeting process is the two major techniques that are adopted by organisation along
with the changing time.
From the different perspectives of authors it can be said that the server that has been
commenced on the literature article for various German company it can be predicted that there is
always a positive Association with the usage of business analytics in the overall budgeting
process.
Further, it has also been said that a company is emphasizing on overall planning
functions and the greater extent to which the business analytics can be adopted in the overall
budgeting process (Vammalle and Rivadeneira, 2019). The modern technique on usage of
business analytics in the overall process so that there can be enhancement of satisfaction and
10

there is difference between the high cost the cost benefit ratio that is related with the degree of
discrimination according to different analytical methods.
When organisation is focusing on the usage of Technical determinants that is data
infrastructure so that a more sophisticated infrastructure of data can be helpful in reducing the
additional cost related with the implementation of different business analytics in an overall
budgeting process of organisation. It can be attributed to various purposes of budgeting function
that is from best estimate of a outcome that is planning function to a motivation target that is
evaluated function. Business analytics is basically supporting the planning function as helping
organisations for reduction of the duration of budgeting and improvement of the accuracy in the
planning stage. In relation with evaluating function business analytics is helping organisations to
set more accurate target with the use of right amount of updated Technology. Organisations have
to make emphasis on the evaluative function so that they are able to avoid the usage of business
analytics as employee participation in the process of budgeting has to deal with the psychology
based reason for more employee performance. It can be said that many times there is no
complete Association between the importance of evaluating function and the usage of business
analytics. but when comparison is made between the traditional mediums of preparation of with
the updated technological it can be said that the time energy and creativity in case of traditional
budgeting it can be completely utilised all the work force of Organisation in other different
activities that can lead to more effectiveness and enhancement of the overall productivity in the
organisation.
5) Recommendations of budgets for contemporary organisations for activities such as
planning & controlling
Based on, the literature findings and the article Digitization of the budgeting process:
determinants of the use of business analytics and its effect on satisfaction with the budgeting
process, 2020. There are certain recommendations related to the budgeting for all the
contemporary organizations related to the planning and controlling activity and this
discussion and recommendations are purely based on the Digitization of the budgeting
process: that is discussed below:
1) Infrastructure sophistication is basically a procedure that has a positive Association with
the overall extent of usage of business analytics in the overall budgeting process. Further it
11

can be said that the importance of planning function in the budgeting is positively associated
with use of business analytics (Shaw, 2016).
2) In the past few years there has been a completely technological driven significant change
in the field and segment of accounting activities in every organization (Mukherjee, ., Al
Rahahleh,. and Lane, 2016). There has been an explicit focus on usage of different analytical
methods such as business analytics. Business analytics has emerged as one of the most
important Management Accounting tools and specially in case of budgeting function.
3) Another factor that has emerged with the changing times with the overall effect on
performance of organization with the effects of digitization. Digitization of all the functions
related to accounting and Finance Department of organization has a complete relation with
the overall system success.
4) There are many different ways in which the planning function of budgeting can be pursued
by organization talked about the evaluation function it can be said that there is only limited
ways for function can be performed (Moreira, 2018). There is requirement of analytical force
for supporting the overall budgeting process along with different analytical methods that
can lead towards higher satisfaction of the overall process. Organizations that are dissatisfied
with their budgeting process have the opportunities to make evaluation of analytic can
benefit them with overcoming all the problems.
5) Budgeting is basically a very data-driven activity and there is requirement of suitable
application of different analytical methods. The traditional budgeting methods are mainly
criticized because of they been very time-consuming in flexible and costly. Business
analytics is basically a tool that can help in removing the overall disadvantages and
difficulties that are faced by organization by usage of traditional methods of budgeting.
Business analytics is a tool that can also lead to an aspect of the satisfaction related with
overall budgeting process. There are many potential drivers that are part of overall business
analytics and make predictions of using sophisticated data infrastructure that is very helpful
12

in having a positive connection with the usage of emerging analytical method (Ma’aji, and
Barnett, 2018).
6) Lastly, it can be recommended that planning and evaluation are the two major
components of budgeting process and major activities that help in determining the overall
effectiveness that can be achieved by properly planning and coordinating the all activities
related to preparation of a particular budget (Miller., Hildreth, . and Stewart, 2019). There
must be a detailed focus on various activities such as planning innovation and overall
allocation of limited resources.
Above discussed are some of the recommendations that are according to key aspects of the
journal paper Digitization of the budgeting process: determinants of the use of business
analytics and its effect on satisfaction with the budgeting process, 2020 and it can be used by
organization related with the overall practices of budgeting and help in achievement of the
overall organization’s objective with the Limited availability of resources and optimum
utilizing them in the course of laid business objectives. It is helping in achievement of the
objectives that is related with the use of necessary technological innovations.
13

CONCLUSION
From the above discussed points, it can be said that particular process of budgeting that is
used by every organisation and it consists of some of the basic steps that are very crucial in
understanding the overall process of formation of budget and the overall role played by the
budget in optimum allocation of resources activity and function that have to be performed.
Further, it has been understood from the various discussed topics in relation and also According
to the various findings in the article with the topic“Digitisation of the overall budgeting process
and various determinants that is usage of business analytics and his overall effect on
satisfaction of the budgeting process.” There are different business analytics in the overall
budgeting process and there is the relation that established between the business analytics and the
satisfaction level of the budgeting process. It can be said that traditional budgeting systems are
no longer used by organisations it leads to wastage of time expenses and does not have high
amount of flexibility. Hence, business analytics is a great tool that can help in overcoming all the
problems and can lead to word hi satisfaction in the overall budgeting process. There is always a
Association between the emphasis on evaluation function and usage of business analytics in the
overall budgeting process. It has an appropriate performing of types of budgeting and laying
down emphasis on different aspects such as planning evaluating and controlling function.
14

REFERNCE
Books and Journals
Al-Mutairi, A., Naser, K. and Saeid, M., 2018. Capital budgeting practices by non-financial
companies listed on Kuwait Stock Exchange (KSE). Cogent Economics & Finance, 6(1),
p.1468232.
Bergmann, M., Brück, C., Knauer, T. and Schwering, A., 2020. Digitization of the budgeting
process: determinants of the use of business analytics and its effect on satisfaction with
the budgeting process. Journal of Management Control, pp.1-30.
Cokins, G. and Dybvig, A., 2018. NEXT GENERATION BUDGETING: If you want more
accurate results from your budgeting process, it may be time to switch from traditional
budgeting to operational budgeting. Strategic Finance, 99(10), pp.38-46.
De Souza, P. and Lunkes, R.J., 2016. Capital budgeting practices by large Brazilian
companies. Contaduría y Administración, 61(3), pp.514-534.
Grossi, G., Reichard, C. and Ruggiero, P., 2016. Appropriateness and use of performance
information in the budgeting process: Some experiences from German and Italian
municipalities. Public Performance & Management Review, 39(3), pp.581-606.
Kamau, J.K., Rotich, G. and Anyango, W., 2017. Effect of budgeting process on budget
performance of state corporations in Kenya: A case of Kenyatta National
Hospital. International Academic Journal of Human Resource and Business
Administration, 2(3), pp.255-281.
Kasdan, A. and Markman, E., 2017. Participatory budgeting and community-based research:
principles, practices, and implications for impact validity. New Political Science, 39(1), pp.143-
155.
Lopez, M.O., 2019. Budgeting Process in a Barangay Unit: An Analysis. International Journal
of Recent Innovations in Academic Research, 3(6), pp.170-183.
Lumbantoruan, D.L. and Mulyani, S., 2019. Planning and Budgeting: The Study of Village
Financing Process In Balige Subdistrict. Journal of Accounting Auditing and
Business, 2(2), pp.46-57.
Lund, V. and Juujärvi, S., 2018. The Role of Digital Tools in the Participatory Budgeting
Process in the Development of a Neighbourhood. Smart Cities in Smart Regions 2018,
p.92.
Ma’aji, M.M. and Barnett, C., 2018. CAPITAL BUDGETING PRACTICES AND RISKS
ADJUSTMENT: PRACTICES AMONG CAMBODIAN COMPANIES. ICMEBSS
2018, p.101.
Miller, S.A., Hildreth, R.W. and Stewart, L.M., 2019. The modes of participation: A revised
frame for identifying and analyzing participatory budgeting practices. Administration &
Society, 51(8), pp.1254-1281.
Moreira, R., 2018. Budgeting process (Doctoral dissertation).
Mukherjee, T., Al Rahahleh, N. and Lane, W., 2016. The capital budgeting process of healthcare
organizations: a review of surveys. Journal of Healthcare Management, 61(1), pp.58-76.
Shaw, T., 2016. Performance budgeting practices and procedures. OECD Journal on
Budgeting, 15(3), pp.65-136.
Vammalle, C. and Rivadeneira, A.M.R., 2019. Budgeting in Uruguay Towards modern
budgeting practices in Uruguay. OECD Journal on Budgeting, 19(1), pp.171-197.
15

Online:
Budgeting Process: Complete Guide, 2015 [online] Available through:
<https://www.cleverism.com/budgeting-process-complete-guide/>
Digitization of the budgeting process: determinants of the use of business analytics and its effect
on satisfaction with the budgeting process, 2020, [online] Available through:
<https://link.springer.com/content/pdf/10.1007/s00187-019-00291-y.pdf>
16