According to Dokulil et al., (2017), proper planning makes a business more successful. While developing plans, management can identify and understand the actual needs of the business, which on the other hand helps management developing better strategies for the business.
The term “budgeting” indicates the process of developing plans in numeric terms. McVay & Cooke (2006) has considered budgeting as the most important element of a because the success of a business highly depends on the effectiveness of the plan that the management develops.
In the current scenario, the organizations are focusing on developing effective budgets because the external environment which has a direct impact on the business is higher competitive. In this competitive era, maintaining a standard market position is quite tough for every firm; however, with the help of a proper financial plan the future of the business can be secured.
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In these two studies, the authors have focused on the critical analysis of budgeting and its importance in the current scenario. However, two articles have focused on budgeting in different ways.
Explaining the selected topic of management accounting
In the introductory section of the study, it has been identified that the selected management accounting topic for this study is budgeting, which is an important part of the business. As stated above budgeting is the financial plan that every business needs to develop to ensure long time survival of the business.
Budgeting can also be defined as the systematic way to manage the income and expenses of the business. Dokulil et al., (2017) mentioned that budgeting is the most important element of a business because it helps in the proper allocation of organizational resources. It means with the help of budgeting the management can efficiently allocate the limited resources of the business. In the other words, it can also be stated that with the help of budgeting the management can easily handle if there is any resource crisis in the business.
McVay & Cooke (2006) believed that budgeting is not only a planning tool, but it can be considered as an efficient tool for controlling business activities. By developing budgets companies can analyze their current capacities to compete in the open marketplace. This actually keeps them aware of the current financial and non-financial position of the business.
As per the article “Beyond budgeting or better budgeting” by Theresa Libby and Murray Lindsay, budgeting is followed by the organizations in order to improve their control system. At the same time, the authors of the study have also mentioned that budgets are the way to communicate the business scenario to the people related to the business (Libby & Lindsay, 2007).
While discussing budgeting, the authors have also noted or mentioned different techniques or approaches of developing budgets that the organizations follow. The authors have mainly focused on the technique of beyond budgeting which is a modern and advanced method of budgeting.
On the other hand, in the study namely – “Are the traditional budgets still prevalent: the survey of the Czech firms budgeting practices” by Popesko Boris, Novak Petr, Papadaki Sarka, and Hradec Dusan, the authors have focused on budgeting by considering the effectiveness of traditional budgeting system in the modern organizational context.
2015). At the same time, the findings also indicate the loopholes in the approach of traditional budgeting.
However, it is also required to note that considering all departmental budgets a master budget is prepared in every business (Libby & Lindsay, 2007). There are different types of budgeting techniques available in the market that can be used for developing efficient budgets. These are a modern ways of developing budgets (Popesko et al., 2015).
Hence, the overall discussion is indicating the fact that budgeting is a wide area of business.
Explaining the purposes and research questions of the two selected studies
The discussion in the previous section has mentioned the two articles on which the study has focused. In this context, it is important to identify and discuss the purposes and research questions of these two articles.
This modern budgeting system has enhanced the scope of budgeting in the current complicated era of business (Libby & Lindsay, 2007). However, in this study, the key purpose was to evaluate and analyze whether the technique or approach of beyond budgeting is effective in the current organizational contexts or the companies need to adopt better techniques for developing an efficient budget for the businesses. The key questions of this study were as follows:
- Are the budgets dispensable?
- Is budgeting inherently flawed?
- Are the budgets adding value to the businesses? (Libby & Lindsay, 2007)
The authors of the study have analyzed the use of budgeting from different points of view.
They tried to focus on the effectiveness of the modern budgeting techniques in the current business contexts. The authors have also tried to identify whether there is any other budgeting technique that can remove the flaws in the beyond budgeting technique (Libby & Lindsay, 2007).
- Is the traditional budgeting system is still effective in the modern organizational context?
- Why many organizations are adopting more sophisticated budgeting methods?
However, as both studies have focused on budgeting, it is obvious that there are some similarities between the two. In the following sections, the similarities and dissimilarities between the two studies have been identified.
A discussion on the similarities and dissimilarities between the two studies
It means there was a basic difference between the perspectives of the two studies. Though both the studies have been done in the field of budgeting, the perspectives were completely different. The authors of the first study have tried to verify the applicability of the modern or beyond budgeting approach.
It means the first article has explored while there is any better budgeting technique available in the current market scenario; whereas the second article has explained the popularity of the traditional budgeting approach.
Providing four specific lessons that have been learned from the two studies
Considering the findings, it has been understood that the application of the beyond budgeting system can improve the budgetary control over the business activities (Libby & Lindsay, 2007).
- These budgets help in better allocation of organizational resources. The findings of the study have also indicated that the beyond budgeting system is much efficient than the traditional budgeting system (Libby & Lindsay, 2007). This particular modern budgeting approach has expanded the scope of budgeting for business organizations.
- This method of budgeting is very critical, which makes the application difficult for the businesses (Libby & Lindsay, 2007).
Lessons learned from the article – Are the traditional budgets still prevalent: the survey of the Czech firms budgeting practices
- Lower level of complexities in the approach has made the traditional budgeting system more preferable to the organizations.
The traditional budgeting approach is much easier to understand and implement; whereas the modern budgeting approach is complex and difficult to implement.
The modern budgeting approach can help organizations in developing more practical and accurate budgets for the business. However, the study has also indicated the loopholes associated with the modern budgeting approach.