The Necessity of Budgeting in an Organization

1396 Words6 Pages
Planning and control are two considerable activities of management in any kind of organization that has as its aim; the profit maximisation. Budgets consider being the main tool for the process of planning and control. The first part of the essay focuses on the definition of the term budget system and the budgetary process. Also, it states the stages of the budgeting process and their necessity in an organization. The second part will discuss the effectiveness of budgetary control in unpredictable and dynamic environments of different companies. The discussion will provide some examples based on the use of budgetary control, with some of their positive effects. Then, the third part of the essay, will evaluate how the planning-based system may fail to succeed in an organisation. The fourth part of the essay will present some potential solutions on how competitive companies can use their budgets, so as to limit the failure of their planning-based systems. Finally, the last part of the essay will be based on real examples of organisations like Ryanair and Primark in order to analyse the way that they use their budget control. Budgets have to be successful managed in any profitable organisation worldwide. When a correct budget is generated, it means that expenditures do not over exceed the total available amount of money hold by the company and it creates a great motivation for managers to achieve their goals. Defining budget, it is a particular plan that is expressed in quantitative terms. It also determines the acquirement and the use of the financial and other operating resources in an organisation in a specific period of time (Seal et al, 2009, pg434). The period might be divided into quarterly or monthly budgets. Any procedure ... ... middle of paper ... ...: [Accessed: 12 February 2014] Margaret. A, Abernethy, Brownell. P, (1999), Accounting, Organizations and Society. [Online] Sciencedirect Database 24 (3). P.189-204. Available from: [Accessed: 12 February 2014] Ranscombe. P, Williams. H, (2014), Primark tipped to shine with low-price fashion. The Scotsman. [Online] 12th January. Available from: [Accessed: 12 February 2014] Scarlett. R, 2005, Management Accounting-Performance Evaluation, 1st ed., Elsevier Seal. W, Garrison. H. R, Noreen. W. E. (2009), Management Accounting, 3rd ed., Mc Graw Hill Wright. O, (2013), Exclusive: Safety warning as budget airlines such as Ryanair cut fuel levels for flights. The Independent. [Online] 6th August. Available from: [Accessed: 12 February 2014]
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