A critical evaluation of the role of Budgetting Essay

A critical evaluation of the role of Budgetting - Essay Example results in nothing more than dysfunctional behaviour has initially been proposed by Hope and Fraser (2003) as part of the Beyond Budgeting Round Table (BBRT). This report is a review of relevance of budgeting in contemporary business contexts and an attempt to suggest which one among ‘better budgeting’ or ‘beyond budgeting’ will be effective to the CFO of Halfords Group plc. This report is prepared to submit to the CFO as he asked me to review literatures and prepare a report based on ‘budgeting- lost relevance’ after he participated in a conference that made him concerned about the matter. In finance and accounting, budgeting is a formal plan expressed in monetary terms and is prepared in a current financial year to provide managers and other stakeholders with an estimate of the anticipated costs and revenues for the next financial year (Chandra, Menon and Mishra, 2007, p. 264). Traditionally, budgets served a number of useful purposes such as 1) planning annual business operations, 2) coordinating various activities in the organisation, 3) communicating these plans to various responsibility managers or departments, 4) motivating managers to achieve desired organisational goal, 5) controlling all activities in the firm and 6) evaluating managers’ performance (Drury, 2006, p. 426). Because of that budgeting looks both forward and backward, it identifies resources that the company is likely to generate and the need in its near future to serve as a measure of current and past performance of department and individual managers (Fabozzi and Drake, 2009, p. 334). Why budgeting has been traditionally considered as an effective strategic tool for management accounting was that it was nothing but a plan relating to future and it helped management take various critical decisions pertaining to strategic planning, budgetary planning and operational planning (Walker, 2006, p. 305). Budgeting has also played a very significant role in strategic and operational