Benefits and Demerits of Various Budgeting Styles

This report discusses the benefits and demerits of various budgeting styles, the links between budgeting and short-term decisions, the impact of changing environments on budgeting styles, and the merits and demerits of participatory budgeting. It also explores the implications of participatory budgeting on business performance.

Business Management

Contents
INTRODUCTION...........................................................................................................................................4
MAIN BODY..................................................................................................................................................4
Benefits and demerits of various budgeting style....................................................................................4
Links between budgeting and short term decisions................................................................................5
Impact of changing environments on various budgeting styles...............................................................6
Merits and demerits of participatory budgeting and its implication on business performance..............6
CONCLUSION...............................................................................................................................................7
REFERENCES................................................................................................................................................9

INTRODUCTION
Accounting is the method of assessing and transmitting financial data to facilitate
knowledge users to make intelligent decisions. Management Accounting is the practice of
defining, assessing production, evaluating, planning, presenting and transmitting important
information that organizations utilize to prepare, analyze and track within an entity and to ensure
the correct use and transparency of capital (Côrte-Real, Oliveira and Ruivo, 2017). These
statistics are produced to executives in order to take effective action. In this report consist of
benefits and demerits of different budgeting styles, define connection between budgeting and
short term decision making properly. Along with analysis the impact of changing environments
influence on multiple budgeting styles. In addition, identify merits and demerits of participatory
budgeting with its application.
MAIN BODY
Benefits and demerits of various budgeting style
There has been some budgeting style that the companies use to achieve their goals &
objectives accordingly. Each budgeting method has various merits and demerits that are
important for the managers to determine before evaluating all of them. Further analysis is as
follows:
The flexible budget is slimmer and more realistic in comparison to static budget. It will
modify expenditures that required alteration with operating quantity, as the budget will generate
a differential payment per unit, instead of fixed expenses (Ghofur, Agustina and Elvierayani,
2019). This budget is a far more useful method for measuring a manager's success in short-term
growth. Adapting to the shift in the corporate climate is beneficial for administrators and
stakeholders, and makes rational decisions accordingly.
This budgeting style has many benefits such as the number of events that can be taken into
account in these budgeting methods. Static budgets are planned for specific phase only but
flexible budgets are intended for a variety of different applications. Flexible plan allows
production capacity, expenditure, or results to be equated with normal or budgeted production ,
cost, and effectiveness. This may be used as an important method for expense control, since

adaptive budgets are sensitive to challenging circumstances. Static budget is focused on
assumptions, judgements, forecasts and predictions. Yet flexible budgetary control is being
planned, based on facts and core principles.
Flexible budget also has many demerits that management teams should be aware of, such
as requiring even more planning to manage production costs and offset the time difference. A
collection that changes with time can result in some consumers misinterpreting the budgeting
method unnecessarily and therefore reducing the probability that they'll be successful in the
implementation. The entire concept of a flexible budget is to make it easier to adhere to, but such
systems can not promote the same continuity or long-term trends as more traditional approaches
by refusing to follow the same rigid routine every month.
Static budget is another type of budgeting style which includes integrating planned inputs
and outputs which are developed even before the incident time begins. A static budget which is a
prediction of revenue and expenditures over a given period remains stable even as income and
production volumes increase or decrease (Wing And et.al., 2019). A static budget strategy is
especially beneficial where a firm has fairly stable sales figures that are unwilling to alter
considerably over the budget planning cycle.
The main advantage of static budget is that, it will be easy to accomplish and monitor, as
static budgets do not need to be regular updated across the accounting period that they will be
intended to cover. Additionally, when carrying out financial reporting, a static budget will offer a
clear view into the firm's expenses and revenues. It helps the firm to consider whether its
expenses and earnings could be underestimated or overstated, so that it can make adjustments or
modify its specific future goal.
Lack of versatility has always been the main disadvantage to the static budget. Whenever a
company manages a budget based on the classification amount of demand for revenues and the
quantity increases, additional resources cannot be spent on maintenance. If a company finds
market fields that are performing poorly along those lines it could not commit additional
resources to assist. That will negatively impact the company's overall sales flow.

As per the scenario Flexible budget help to business because in changing environment
company face many problems that can impact on the budget. In flexible budget company apply
the changes as per the situation and predict future scenario but in static budget not.
Links between budgeting and short term decisions
There is a visual networking between financial planning and short-term decision-making.
It is so because administrators can gather crucial data about specific things with the assistance of
various sorts of budgets. Such as cash budget give an outline of additional revenue sources and
expenditure. This approach can lead to remedial action for the period of time ahead. As in the
above-mentioned business Marks & Spencer, their executives make short-term decisions
according to details obtained from different kinds of schedules. One of the main aspects of
financial planning is that due to the nature of the operation, there is a variety of budgets (Mole
North and Baldock, 2017).
Impact of changing environments on various budgeting styles
The external environment contains a number of variables each of which has the potential
to affect overall efficiency. And even some corporate budgeting models are also influenced by
shifts in external influences. In the above-mentioned Marks & Spencer business their budgets
may have impacted attributed to reasons such as:
• Change in demand- It is one of the most significant variables that can impact various forms of
budgeting. That's because if the production of the clients reduces then the financial plan can be
adversely impacted. Such as Marks & Spencer business below, if they planned a sales plan for
the current length of time that shows good results. If people socially their preferences or test
approach then organization can avoid problems since budget calculation would be incorrect
(Pohlmann and Kaartemo, 2017).
• Interest rate volatility- This factor may impact the company money or purchasing plan. This
was because if interest rates go up in the potential then projected sum of financial transactions
can be incorrect though because the business may also encounter problems in the prediction of
purchasing expenditures. For example, their various types of budgets can be impacted across
both direct and indirect ways in the above Marks & Spencer corporation market interest rate
transformation.

Merits and demerits of participatory budgeting and its implication on business performance
Participatory budgeting is a system in which an organization’s employees can work in the
revenue and expenditure calculation process. A bottom-up approach to risk management aims to
strengthen expenditures that are even more reasonable than for the top-down spending plan that
shared storage obliges an establishment with very little individual employees. In the Panasonic
corporation component earlier in this thread, this money management analysis can be extended
that can increase productivity and morale as they are engaged in the government budget. This
budgeting process has certain pros and cons that are described in this way underneath:
Benefits: Participatory budgeting certainly has many advantages, such as the transfer of
information for monetary and goal management from inferior to supreme. This could lead to
higher employee engagement. Another of the advantages of developing participative budgets is
the transfer of information from superior to chief. Superiors have opportunities to directly meet
the supreme and discuss organizational issues with all of them and may share the expertise and
ideas that will solve the problems and complement future viewpoints (Pröllochs and Feuerriegel,
2020).
Drawbacks: Despite the beneficial outcomes, participatory budgeting often has its
unwelcome influence on an organisation. Period-consuming is the major drawback to the method
to financial planning. Vacuum and postponement can emerge while there are so many talks
going on. Budgetary slackness is also another detrimental outcome that results from
overstatement of expenditures and therefore can promote discretionary "mining" through budget
slacking.
Implication on business performance
Such budgeting is valuable for an efficient way of enhancing company efficiency. This is
necessary as the individual is directly interested in making estimates of revenue and costs under
that same. Instead from which workers get empowered as their interest increases in the business
along with they connect effectively to management that translates to improved business
outcomes. According to the above Marks & Spencer business, in order to raise their workers
morally and empower there in the cycle of financial planning, they should introduce this

budgeting system. Besides this, organizational culture will give the employees a variety of
suggestions and perspectives on the drawing growth of government strategies (Buil, Catalán and
Martínez, 2019).
CONCLUSION
It can be inferred on the strength of the above research project that financial management
is an important method for businesses in order to efficiently distribute monetary capacity. The
study elucidates various varieties of money management types, such as static, set, that are
analyzed objectively in a thorough way. The other part of the report illustrates the differences of
financial management in order to take strategic decisions and become necessary based on the
information offered through various types of plans. It can be learned from the end part of the
study that participatory budgeting is a positive method for both businesses and workers.

REFERENCES
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