University Finance: Performance Management and Control Report

This report provides a comprehensive analysis of performance management and control within a finance context. It begins by evaluating the usefulness of flexible budgets, outlining their advantages such as cost adjustments and fund distribution, and disadvantages like confusion and potential loss of financial discipline. The report then delves into budgeting systems, discussing their purpose, various standards (attainable, basic, ideal, and current), and styles (top-down and bottom-up). It examines the advantages, including planning and performance evaluation, and disadvantages, such as time consumption and a focus on financial issues. Finally, the report assesses modern approaches to planning and operational variance analysis, detailing their disadvantages like late financial results and non-availability of data, and the difficulties organizations face in their application. The report uses references from academic journals to support its findings.

Running head: PERFORMANCE MANAGEMENT AND CONTROL
PERFORMANCE MANAGEMENT AND CONTROL
Name of the Student
Name of the University
Author Note

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Table of Contents
Task 1...................................................................................................................................2
Advantages of flexible budget.........................................................................................2
Disadvantages of flexible budget.....................................................................................2
Task 2...................................................................................................................................3
Budgeting purpose...........................................................................................................3
Budgeting standards.........................................................................................................3
Budgeting styles...............................................................................................................4
Advantages of budgeting.................................................................................................4
Disadvantages of budgeting.............................................................................................5
Task 3...................................................................................................................................5
Disadvantages..................................................................................................................5
Difficulties.......................................................................................................................6
References............................................................................................................................7

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Task 1
Advantages of flexible budget
The major advantages of the flexible budgeting are as enlisted below.
 The flexible budgeting helps in the adjustment of the costs that are incurred by the
concerned company. The adjustment is majorly done in the purchase slots that are
seasonal in nature and are adjusted in a way that the other costs are not affected hugely.
 The flexible budgeting also helps in the revision of the irregular payouts that are extended
to the concerned employees of the organization.
 The flexible budgeting also helps in the proper distribution of the funds that are available.
This helps in the lowering down of the stress levels (Li et al. 2016).
 The flexible budgeting helps the organizational management in the analysis of the
deviation of the actual outcome from the expected outcome of the concerned business
activity.
 The flexible budgeting within the organization also helps in the cost control objectives
that are undertaken by the concerned business organization.
Disadvantages of flexible budget
The major disadvantages of the flexible budgets are as enlisted below.
 The flexible budgets are confusing in nature due to the fact that the flexible budgeting is
confusing in nature. This is backed up by the difficulty in the tracking of the expenses
that have been incurred by the concerned organization. This further considers the cost
issues that have been raised due to the adjustment of the differences within the incurred
costs.

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 The flexible budgeting within the organization tend to complicate the budgeting
processes. This might lead to the conditions wherein the set financial limits are often
crossed in order to accommodate the people who have been involved in the budgeting
process.
 The flexible budgeting within an organization leads to the loss of the discipline in the
financial matters of the organization (Uyar and Kuzey 2016). The flexibility of the
budgeting process might lead to the conditions wherein the concerned department might
find difficulty in tracking the financial inflow and outflow.
Task 2
Budgeting purpose
Budgeting, from the point the business point of view, is an integral part of the business
activities that are undertaken by the concerned organization. The business organizations
generally tend to discuss the matters like the forecasting of the expenditure that is incurred by the
organization and the income of the business organization (Nguyen, Weigel and Hiebl 2018). This
has in turn led to the calculation of the expected profitability of the concerned organization. The
budgeting within the organization is known to one of the decision-making tools that are
implemented by the business organization. The budgeting also serves as a tool for the monitoring
of the performance of the organization.
Budgeting standards
Attainable Standard – The main distinguishing feature of the attainable standard of
budgeting is the fact that the given organization aims to deal with the unavoidable nature of the
inefficiencies in the organizational operations (Blanchard 2015).

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Basic Standards – The establishment of the basic standards within the organizational
budgeting helps in the matters that are related to the longer use of the budget that have been set
by the organization.
Current Standard – The current standard of budgeting within the organization aims to
deal with the effect of the present scenario on the financial aspects of the business.
Ideal Standard – The ideal standard of budgeting aims to focus mainly on the perfection
within the given business organization. this standard within the organization aims to deal with
the minimal cost that is incurred by the organization (West, Prendergast and Shi 2015).
Budgeting styles
Top-down budgeting – In this style of budgeting, the senior management levels within
the company are known to have composed the budget which is thereafter passed down to the
employees who have been serving at the lower hierarchical levels of the company.
Bottom-up budgeting – In this budgeting, the lower levels of the management of the
company are observed to compose the budget which is later approved by the senior management
of the company (Sponem and Lambert 2016). The bottom- up budgeting leaves open ends in the
budget plan of the company due to the fact that the lower levels of management are generally not
aware of all the complete strategic plans that is adopted by the concerned organization.
Advantages of budgeting
The advantages of the budgeting activities within the organization are enlisted below.
 The orientation of the planning.
 The review of the profitability of the organization.
 The evaluation of the performance

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 The planning of the funding
 The pre-allocation of the funds within the organizations.
Disadvantages of budgeting
The disadvantages of the budgeting activities within the organization are enlisted below.
 The requirement of larger amount of time.
 The expenditure of the allocated amount.
 The ability of the flexibility within the budget within the organization in order to achieve
the variances against the budget that might prove to be favorable for the concerned
departmental manager.
 The budgets are known to concentrate majorly on the financial issues within the
organization. However, the budgeting plans within the organization do not take into
consideration the other subjective issues within the organization.
Task 3
Disadvantages
The disadvantages of the application of the modern approaches towards the planning as
well as the operational variance analysis are enlisted below.
 The late publication of the financial results
 The lesser time that is made available for undertaking the various remedial actions.
 The non-availability of the accounting data for the variance analysis.
 The non-availability of the detailed analysis of the factors.
 The loose ends of the budgeting which deviates from the actual numbers (Taieb and
Atiya 2016).

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 The non-meeting of the organizational expectations. This results from the deviation of the
analysis from the actual numbers of the analysis.
Difficulties
The difficulties that the organization in discussion might face due to the application of the
modern approaches towards the planning as well as the operational variance analysis are related
to the disadvantages that have been discussed in the above section. The key difficulty that is
faced in the variance analysis of the financial matters within the company is the fact that the
financial results are published much later and thus there is generally observed a huge time gap
(Akinwande, Dikko and Samson 2015). This time gap is later known to be responsible for
affecting the remedial actions that need to be undertaken by the concerned organization.

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References
Akinwande, M.O., Dikko, H.G. and Samson, A., 2015. Variance inflation factor: As a condition
for the inclusion of suppressor variable (s) in regression analysis. Open Journal of
Statistics, 5(07), p.754.
Blanchard, L.A., 2015. PART and performance budgeting effectiveness. In Performance
Management and Budgeting(pp. 81-105). Routledge.
Li, Q., Ma, F., Gao, J., Su, L. and Quinn, C.J., 2016, February. Crowdsourcing high quality
labels with a tight budget. In Proceedings of the ninth acm international conference on web
search and data mining (pp. 237-246). ACM.
Nguyen, D.H., Weigel, C. and Hiebl, M.R., 2018. Beyond budgeting: review and research
agenda. Journal of Accounting & Organizational Change, 14(3), pp.314-337.
Sponem, S. and Lambert, C., 2016. Exploring differences in budget characteristics, roles and
satisfaction: A configurational approach. Management Accounting Research, 30, pp.47-61.
Taieb, S.B. and Atiya, A.F., 2016. A bias and variance analysis for multistep-ahead time series
forecasting. IEEE transactions on neural networks and learning systems, 27(1), pp.62-76.
Uyar, A. and Kuzey, C., 2016. Contingent factors, extent of budget use and performance: A
structural equation approach. Australian Accounting Review, 26(1), pp.91-106.
West, D., Prendergast, G. and Shi, Y.Z., 2015. Advertising budgeting methods and processes in
china. In Assessing the different roles of marketing theory and practice in the jaws of economic
uncertainty (pp. 288-294). Springer, Cham.