AC202 Week 7 Lecture

AC202 Week 7 Lecture - Week 7 Lecture Chapter 23 Outline I....

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Week 7 Lecture
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Chapter 23 Outline I. Budget Process Process of planning future business activities. A. Strategic Budgeting 1. Budget Formal statement of a company’s future short term financial plans. 2. All managers should be involved. 3. Relevant focus of budgeting analysis is future. 4. Focus on future is important because daily operations may divert management’s attention from planning. 5. Good budgeting system formalizes planning process and demands relevant input; makes planning an explicit management responsibility. B. Benchmarking Budgets 1. Control function requires management to evaluate (benchmark) business operations against some norm. 2. Evaluation involves comparing actual results against: a. Past performance or b. Expected (budgeted) performance. 3. Evaluation assists management in identifying problems and taking corrective actions if necessary. 4. Evaluation using expected performance is usually superior to using past performance when deciding if actual results trigger need for corrective action. a. Past performance fails to take into account changes that may affect current and future activities. i. Changes in economic conditions. ii. Shifts in competitive advantages within the industry. iii. New product developments. iv. Increased or decreased advertising. v. Technological advances and innovations. b. Budgeted performance levels anticipate and adjust for changes in important company, industry and economic factors. c. Budgets provide management an effective control and monitoring system. C. Budgeting and Human Behavior 1. Budgeting provides standards for evaluating performance and can affect the attitudes of employees evaluated by them. Notes
Background image of page 2
2. Three guidelines to ensure positive effect on employees’ attitudes. a. Employees affected by budget should be involved in its preparation to increase commitment to meeting it (participatory budgeting). Chapter Outline b. Budgeted levels of performance must be realistic (goals must be attainable) to avoid discouraging employees. c. Evaluation should be made carefully and allow affected employees to explain reasons for apparent performance deficiencies. D. Budget as a Management Tool 1. Activities of all departments should contribute to meeting company’s overall goals. 2. Careful coordination required; budgeting achieves coordination. E. Budgeting Communication 1. Written budget clearly documents management plans and specific action plans to all employees. 2. Informal communication of business plans can create uncertainty and confusion. II. Budget Administration Proper administration required of this important and detailed activity. A. Budget Committee 1. Without active employee involvement, risk that employees will feel as if budget fails to reflect their special problems and needs. 2. Budget figures and estimates more useful if developed
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 11/11/2011 for the course AC 202 taught by Professor Nancyeverett during the Spring '09 term at Park.

Page1 / 22

AC202 Week 7 Lecture - Week 7 Lecture Chapter 23 Outline I....

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online