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Business Finance: Analysis - Case Study Example

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The paper explores the reason behind such non acceptability of the budget planned by financial managers at Charles Ltd and draws the behavioural reasons behind the failure of management in getting their budget accepted by various departments…
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Business Finance: Case Analysis
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Business Finance: Analysis

Download file to see previous pages... Drawbacks of the Budgetary Control System in Practice
The budgetary control system analyses the Management Accounting as a Behavioural Process more than simply a financial process. The budgeting process at Charles ltd was not accepted by the departments primarily because of several behavioural issues that can be highlighted from the provided case. The case suggests a great deal of evidence whereby practical implementation of budgets calls for addressing behavioural issues more than making the budget acceptable within the organization.
In case of Charles Ltd., the managers found it difficult to make their budgets accepted across departments of the company. After the 3 month period, they found large variances of actual production from planned estimates. Janet, a supervisor at Department D thought that the plan was some paperwork that did not require her attention and also the report prepared was unfair to for their team with several inaccuracies (ICSA, 2005).
1. The managers lack of concern acts as major criteria for non acceptance of financial plans by departments. Such lack of concern arises from lack of communication between the concerned departments while formulation of budgetary estimates. The managers need to be well aware of the production techniques and usage requirements and also understand efficiency norms and standards for various inputs. Only after due consideration of the interrelated production processes can the budget plan well at the departmental and hence the managerial level.
Janet’s comment on unfairness and inaccuracy of financial report reflects that the financial plan or the budget was prepared without due consideration of the departmental issues and production related concerns. The figures were prepared without proper groundwork which includes understanding production capacities and techniques, problems associated in production line, uncontrolled inefficiencies and drawbacks and such other issues the contribute to production figures (Cotts and Rondeau, 2004). 2. Financial managers need to improve communication between the concerned departments. Such communication helps to identify the loopholes and also areas of concern where efficiency hits a rock. Lack of communication also contributes in helping management to make their employees understand the importance and relevance of budgetary planning. Communication becomes necessary to make people aware of organisational goals and why such goal setting calls for planning and adherence to plans. It was lack of communication between concerned teams that called for non - adherence to financial plans and preparation of faulty budget. 3. As a result of the present budgetary situation, non acceptance by departments might lead to mismanagement of department’s production plans where each department has a different target set for itself and ...Download file to see next pagesRead More
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