The application of a budget is done by a business with a view to plan, coordinate and controls the activities of the business. The management of a company can appropriately set targets on the basis of the past year and current years trends with the help of a budget. This further ensures that the company is in its right path towards the strategic goals and objectives of the business. The company which is considered for the assessment is Amcor ltd which is engaged in recycling business and also has several other operations. The management of Amcor ltd needs to make the business more systematic and transparency and the same can be done by implementing flexible budgeting technique and setting targets so that the strategic goals of the business can be achieved. Another advantage which can be identified using such an approach is that the variances if any can be identified when actual performance is measured with standard set. The budget process can assist the management to measure any lag in performance and thereby formulate strategies so that the same does not take place in future period. In this manner, the business can achieve financial stability and highest level of performance in the business.
It is to be further noted that budgets needs to be reviewed on regular basis by the senior management and the same needs to compare with the milestones which are set. The management in this manner can maintain accountability in the business. It is advisable to the management of Amcor that budgeting practices needs to be implemented in the operations for proper planning and controlling the operations of the business.
The strategic plans of a business is formulated ahead of a financial year an after which a budget is prepared. The strategic plan is an overall plan which covers different performance area of the business and one of the same is financial area. The management of the company cause a budget to represents the targets which are consistent with the strategic plans of the business. The budget allows the management to estimate financial targets and also forecast the growth for the next year or next five years. The management of Amcor ltd needs to prepare the budget for the year in such a manner that it reflects the principle of the strategic plan of the business. One other advantage of budgets is that it helps in proper allocation of resources and reduces incidence of wastage. The management can make the operations more systematic in nature if budgeting practices are implemented as proper allocation of resources would be possible and proper control can be maintained.
Participative budgets are a form of budget which allows the management to take opinions of the lower level managers to take part in budget setting process and also involves the employees There is difference between participative and imposed budget as the former budget allows the opinions of the employees while the latter is basically forced. The application of participative budget provides confidence to the employees that they are valuable to the company and they are also contributing to the cause of the business. In addition to this, participative budgets tend to get achieved in most of the times as the targets are set accordingly to the resources available and efficiency level of the employees. In addition to this, participative budgets can be more realistic as viewpoints of all personnel’s are considered for preparing the budget.
The case shows that Nick, a senior official of the company thinks that budgeting practices in the business is not possible as there are more than 50operational sites. However, if participative budget is adopted than preparation of budget would not be that difficult as opinions of the supervisors would guide the management to formulate the budget without the hassle of visiting each site. The target which would be set by the management would be more realistic and thereby can be achieved by the management with a little effort. Therefore, it can be said that a participative budget would be much more favourable for the business.
The budgeting setting process is a time consuming process even though the effectiveness of the technique outweighs the hassle which is involved in the preparation of the budget of the company. The opinion of Nick is accurate that the budgeting process if implement for the business of Amcor ltd would be hectic as there are 50operational sites and preparation of master budget would be a difficult process. However, the management can implement a participative budget so that it can overcome the hassle slightly and rely on the opinions of the lower level manager of Amcor ltd for such 50 operational sites for formulating the budget for the business. The lower managers of such sites would have a better idea regarding the capacity which the business has for conducting the operations of the business. It is for such reason that participative budget would be the most appropriate option available to the management of Amcor ltd.
The implementation of the participative budget would make the budgeting process less time consuming and thereby promote efficiency in the operations of the business. In addition to this, the management of the company needs to consider that the advantages of setting up a budget would help the management to properly control the activities of the business. The efforts which are put in the budgeting process is completely worth it as it improves the internal functions of the business and promotes transparency in the operations of the business. Therefore, it can be said that the management of Amcor ltd needs to implement a participative budget so that proper operational process can be maintained.
Bogsnes, B., 2016. Implementing beyond budgeting: unlocking the performance potential. John Wiley & Sons.
Hagel, J. 2014. How to better connect planning, forecasting, and budgeting. Journal of Accountancy, 217(4), 20.
Knabke, T., Olbrich, S. and Biederstedt, L., 2015, May. Considering Risks in Planning and Budgeting Process–A Prototype Implementation in the Automotive Industry. In International Conference on Design Science Research in Information Systems (pp. 401-405). Springer, Cham.
Swain, J.W. and Reed, B.J., 2014. Budgeting for public managers. Routledge.
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