Budget Evaluation

Paper Summary:

The aims of this paper are to identify the stages of the budgeting process and to evaluate their effectiveness. The article evaluates the level and validity of detailed assumptions used to create budget estimates. It discusses the role of the budget as an analytic tool that can be used to evaluate organizational performance. The writer explains how the budget can be used to find and eliminate inefficiencies in an organization's performance and explains the role of the budget in the business control cycle. The author analyzes internal and external control mechanisms that can be put in place to monitor and evaluate the budget and describes how the budget can be used in the performance accountability and reward process. The writer makes use of the example of a major business initiative in an organization that was approved last year as a result of the budget process, and explains how the budget was used in the approval process.

From the Paper:

"There are four stages in most budgeting processes. The first stage is information gathering. At this stage past performance results are collected and assessment is made of the company's strategic plans. Performance results for the previous year are gathered, the company's current objectives are defined and the market in which the company operates is evaluated. Some companies also include customer feedback in their information gathering tasks. Planning is the second stage, with determinations made about how detailed the budget will be and how it will be organized, whether by department or product or other groupings."

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• Case Study # 96645 : "Riordan Budget Reduction"

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