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Performance Based Budgeting - management systems and techniques - Term Paper Example

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Budgeting has the longest financial history in the society. In the ancient days budgeting was based on immediate needs. Budgeting was in form of barter trade. When an…
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Download file to see previous pages The requirements include procurement charges, maintenance charges, leisure and retreat activities. Once the budget is formulated and implemented only minor adjustment can be included in the budgets. According to Segal & Summers (2002) this type of budgeting has been used by organizations to ensure that they operate within a specific financial circle. However, budgeting tactics have advanced over the years as units are subjected to high costs of survival. Knaap (2007) argues that the modern cooperate environment does not provide room for an organization to finalize its budgeting at the beginning of a financial year. The author further argues that the specification of a finalized budget does not provide room for innovation and new operational strategies. It is advisable that units have budget specifications that allow for adjustment in case of emergencies without having a major impact to the unit. Financial analyst argue that performance based budgeting is the most significant trend that budgeting has undergone.
Performance based budgeting is a budgeting process based on missions, goals and objectives. PBB is a defined by an organization short term goals. According to Marc (2007) before setting aside funds, the objectives should be set aside. This budgeting is based on the question why should we spend, is what we spend worth the project and is the objective being met by the financial allocations we make. Generally, performance based budgeting is result oriented. Every single financial allocation is aimed at achieving a specific objective. Each objective budgeted for is directed towards achieving the long and short term goals of an organization. Due to the tightened financial crisis performance based budgeting has been the most budgeting method most organizations use. Analysts argue that performance based budgets are more accurate when compared to other budgeting tactics. According to Marc (2007) ...Download file to see next pagesRead More
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