Chapter10 - Chapter 10 Budgetary Planning and Control Some...

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Chapter 10 – Budgetary Planning and Control Some things we know : The objective of every business is to make money for the owners. The role of management is to plan, control and measure performance and make decisions, aimed at meeting the objective. Planning and Control Planning and control should start with a top-down approach . The Board of Directors develops a high-level business plan aimed at increasing the value of the company over an extended period of time. We want our Company to grow by 15% per year for the next 10 years. Senior Management develops a strategic plan to meet the business plan We need to expand our existing business, vertically and horizontally And maintain a 10% growth rate for our existing operations. Subsidiary Level Management develops an operating plan to meet the strategic plan What do we have to do this coming year to grow our business by 10% What level of sales will be required? What level of production will be required? What capital expenditures will be required? Can we accomplish the 10% growth through sales volume alone? Will we have to reduce fixed costs? Departmental Level Management prepare budgets based on the parameters determined in the operating plan. If the budgets are maintained, the operating plan will be achieved, which will put us one step closer the meeting the strategic plan, which if met will accomplish the business plan established by the Board of Directors, which should result in increasing the value of the company, and in term result in profits for the owners. Communication is critical to the success of the Planning process. Top-down makes clear the objectives and plans for the company. Bottom-up identifies resources needed to accomplish the Plan And the potential hurdles that will have to be addressed DeGeorge firmly believes that a bottom-up approach to planning (and budgeting) is “the tail wagging the dog”. It may sound admirable but it is not a good thing. Bottom-up communication is very important, and critical to the success of a business.
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This note was uploaded on 04/04/2011 for the course MBA 504 taught by Professor Smith during the Spring '11 term at Milwaukee School of Engineering.

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Chapter10 - Chapter 10 Budgetary Planning and Control Some...

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