Question

Budgets can be useful tools for planning and control, but they can also prevent challenges for many managers and spur unintended negative consequences. Some companies have begun exploring alternatives to traditional master budgeting.

Carefully review each resource and provide a thorough assessment of the benefits and drawbacks of traditional budgeting practices. Explain weather you support a company's use if a traditional budget or recommend a an alternative approach. Support your viewpoint by directly citing from your learning resource you chose to use.

Answer 1

Traditional budgeting is the process of projecting your business’s revenue and expenses for the upcoming year based on your previous budget. A budget is an accounting tool that helps you predict and analyze your business’s earnings and expenses. By looking at your previous budget, traditional budgeting gives you a template to justify your predictions.

advantages - A traditional budget helps with decision making. Because a budget makes it easier to spot issues, you can decide to make changes to your business.

Traditional budgeting is also important if you try to obtain financing. Investors and lenders want to see your financial plans and projections before investing in your company or giving you a loan.

drawbacks -  inaccurate representation of goals

time consuming.

the company can use alternatives to traditional budgeting like

• zero-based budgeting
• priority-based budgeting
• activity-based budgeting.

zero based budgeting - Zero-based budgeting requires that expenditure above a zero base be justified and that costs be estimated for differing levels of output and service, i.e. that all expenditures be justified, not just additional expenditure. The major advantage of zero-based budgeting is that all proposed expenditure can be judged consistently and that optional and discretionary operations can be more closely scrutinised.

Priority-based budgeting

Priority-based budgeting is designed to produce a competitively ranked listing of high to low priority discrete bids for resources which are called "decision packages". A method of budgeting whereby all activities are re-evaluated each time a budget is set.

Activity‑based budgeting -

Activity-based costing information can be used in financial institutions as the basis for a variety of tools that will assist senior managers in the management of the cost base. It can be used as the basis of a regular means of managing the cost base by activity throughout the organisation.