Discuss about the Capital Budget Practices by Non-financial Companies.
Alviniussen and Jankensgard (2015) define budget as a financial documents which enables business organization to plan their allocation of resources towards various activities like marketing and new plants. The business organizations make estimation of expenditures and sources of revenue. They incorporate business targets like revenue they want to achieve in the coming financial year, the number of units of the products which they aim to sell, the profit percentage which they want achieve by selling the products and monthly expenditure. Budgets show expenditures like future purchase of land, acquisition of office premises and maintenance expenditures to acquire furniture. AL-Mutairi, Naser and Saeid (2018) mention that budget not only shows that prospective sources of revenue and expenditures, but also enables the management to form business plans. The apex managers can allocate the resources according to the estimates shown in the budget. Purce (2014) further points out that budget paves way for strategic human resource management. They mention in this respect that the apex management bodies form business plans and allocate human resources towards them. However, Dudin et al. (2015) contradicts these opinions and point out that business organizations face several challenges while implementing budgets. There are various factors which attribute towards these challenges like types of industry and changing market conditions.
Foster (2017) points out to the first challenge which business organizations face while implementing financial budget-lack of planning. He points out that business organizations prepare long term budget with the view of estimating business aspects like market risks and take initiatives to deal with them. However, it is not possible for business organizations to estimate or predict risks or market trends. Li (2015) point out that unexpected market trends like change in customer preferences and government decisions like increase in taxes can the entire budget inaccurate. Thus, one can infer from the analysis that the unpredictable nature of the market poses continuous threats to the implementation of the budgets in business organizations. However, it cannot be denied that budgets pave ways for future strategies and allocation of resources (Purce 2014).
The second challenge which business organisations face while implementing budget is the availability of limited resources before business organisations. Hahn et al.(2014) while speaking of limitations of resources which business organisations face while forming budget, refers to limited resources of business organisations as a great challenge. They mention that business organisations have to allocate resources like human resources towards forming and implementing the budget. This creates shortages in the present operations of the organisations both in terms human resources and financial resources. The business organisations have to allocate resources both towards the budget and towards its present operations which puts a lot of strain on its resources. Hahn et al. (2014) point out that business organisations especially the multinational American companies have to allocate immense resources to serve their home and international market. Moreover, the need to form budget put extreme strain on their resources which at times jeopardises their operations. The business organisations in order to meet both their present and budgeted future requirements are compelled to put so much strain on their human resources that it often results in burnout of the employees. Marek, Schaufeli and Maslach (2017) mention that this burnout presents the next challenge before business organisations.
The next challenge which budget poses before business organisations is extreme pressure on their human resources which ultimately leads to high turnover of employees. Khamisa et al.(2015) in this respect mention that business organisations have to allocate their human resources towards both the budgeted targets and actual business operations. For example, the marketing departments in business organisations have to allocate a part of their marketing staff towards sourcing business from the present markets and a part of the marketing towards scoping new markets. Thomas, Kohli and Choi (2014) points out that this puts intense pressure on the existing human resources. They further point out that extreme professional pressure is detrimental to job satisfaction. This pressure is often attributed to high employee turnover in business organisations which in turn leads to high recruitment expenditure in business organisations. Thus, business organisations face immense challenge in allocating their present resources towards budget implementations and maintain their present productivity simultaneously.
The next challenge which implementation of budgets present before business organisations is that there are different types of budgets. Wang, Wang and Powell (2017) mentions that business organisations have to make different types of budgets to meet their needs. The production budget is prepared by the production department while the marketing budget meets the requirements of the marketing department. The apex management then have to amalgamate all these different types of budgets which present a challenge. Huynh, Barros and Bérenguer (2015) further points out that this multilevel budget making creates immense pressure on the management and in the individual departments. Moreover, there are types of budgets like flexible budgets and activity based costing budget. The business organisations have to choose the appropriate type of budget in order to gain business growth. This also puts pressure on the business organisations and their financial knowledge.
Burger, Kaufman and Atkinson (2015) point out that budgets are restricted to the financial aspects of the business and do not incorporate the non-financial aspects of the business. Zaman (2017) in this regard point out that as far as future business generation is concerned, organisational culture and leadership style play significant role. Departmental heads using participative leadership style can motivate employees to participate in making the budgets. Since in this case the budgets are aligned to the capability of the departments, the employees experience less pressure. Anderson, Chandy and Zia (2018) point that budgets cannot consider or exhibit these non-financial aspects like leadership. Budgets do not show employee capabilities and thus provides challenge to departmental heads in implementing them. They do not show aspects like employee turnover or employee burnout. This makes it difficult for managers to implement budgets efficiently.
Provide a detailed critical analysis of (minimum 4) research articles to be carried out. Place your investigation in the context of previous research and justify how you have approached your investigation. Provide evidence to help explain the findings of your investigation.
Financial budget is one of the most important documents business organisations use to forecast future income and expenditures. Business organisations prepare budgets to forecast the business targets like the sales they want to achieve in the coming period, human resource requirement, production target to be achieved, assets to be acquired if any and acquisitions and mergers which are to be considered. The large business houses follow complex budgeting method involves synthesis of departmental budgets to form the central budget. However, implementation of budget is also complex as preparing them. The paper would deal with these challenges which business organisations face in implementing budgets (Purce 2014). The research philosophy would help in delving into the challenges which business organizations face while implementing budgets. The research would combine positivism and interpretivism to follow the realism.
There are three research design approaches namely, descriptive, exploratory and explanatory. The descriptive approach is used to obtain detailed knowledge in a particular subject. The exploratory approach is used to delve into areas of knowledge which have not been either explored at all or very little. The explanatory approach tries to connect between two variables. The research would opt for explanatory approach of research design approach. This is because the topic challenges in the implementation faced by organisations have two variables. They are the challenges and the business scenario itself which in turn impact the budget. Thus, the implementation of budgets also differ from organisation to organisation and comes under several market influences as well (Eerkes-Medrano, Thompson and Aldridge 2015). Thus, one can justify that considering the variable challenges and dynamic scenario, explanatory approach of research design would be appropriate.
The population of the study would be working people, preferably those who participate in the making of budget. The research can adopt two approach to gain large amount of information that would go into conducting the research. The two methods of collecting information would be secondary and primary. The secondary method of gaining information should consist of consulting financial statements of companies from diverse industries, articles, journals and books related to challenges faced in implementing budgets. The primary method of gaining information can have two approaches preferably, interviews and survey. The researcher can interview a person working in the finance department of any firm. He can also survey people and then filter the feedback received to accumulate only the feedback related to budget implementations.
The sample size would consist of 100 respondents in order to gain a large number of feedback. The researcher would then analyse the feedback to express it statistically using software like SPS.
The researcher should consider certain legal, ethical and social issues while gaining feedback from the respondents. First, he should gain consent from the respondents before surveying or interviewing them. Second, he should gain their consent before using there feedback in the research. He should strictly abstain from asking personal question to the respondents.
A detailed evaluation of the different research techniques and tools utilized need to be carried out. Also assess the research methods chosen for your research work. In this part, you have to include introduction, initial research design, Population of the Study, Sampling Technique and Sample Size, Legal, Ethical, and Social Issues,
Reference
AL-Mutairi, A., Naser, K. and Saeid, M., 2018. Capital Budgeting Practices by Non-financial Companies Listed on Kuwait Stock Exchange (KSE). Cogent Economics & Finance, (just-accepted).
Alviniussen, A. and Jankensgard, H., 2015. Enterprise risk budgeting: bringing risk management into the financial planning process..
Anderson, S.J., Chandy, R. and Zia, B., 2018. Pathways to Profits: The Impact of Marketing vs. Finance Skills on Business Performance. Management Science.
Burger, R.H., Kaufman, P.T. and Atkinson, A.L., 2015. Disturbingly weak: The current state of financial management education in library and information science curricula. Journal of Education for Library and Information Science, 56(3), p.190..
Dudin, M., Prokofev, M., Fedorova, I., Frygin, A. and Kucuri, G., 2015. International Practice of Generation of the National Budget Income on the Basis of the Generally Accepted Financial Reporting Standards (IFRS)..
Eerkes-Medrano, D., Thompson, R.C. and Aldridge, D.C., 2015. Microplastics in freshwater systems: a review of the emerging threats, identification of knowledge gaps and prioritisation of research needs. Water research, 75, pp.63-82.s
Foster, T.A., 2017. Budget Planning, Budget Control, Business Age, and Financial Performance in Small Businesses(Doctoral dissertation, Walden University).
Hahn, T., Preuss, L., Pinkse, J. and Figge, F., 2014. Cognitive frames in corporate sustainability: Managerial sensemaking with paradoxical and business case frames. Academy of Management Review, 39(4), pp.463-487.
Hahn, T., Preuss, L., Pinkse, J. and Figge, F., 2014. Cognitive frames in corporate sustainability: Managerial sensemaking with paradoxical and business case frames. Academy of Management Review, 39(4), pp.463-487.
Huynh, K.T., Barros, A. and Bérenguer, C., 2015. Multi-Level Decision-Making for The Predictive Maintenance of $ k $-Out-of-$ n $: F Deteriorating Systems. IEEE transactions on Reliability, 64(1), pp.94-117.
Khamisa, N., Oldenburg, B., Peltzer, K. and Ilic, D., 2015. Work related stress, burnout, job satisfaction and general health of nurses. International journal of environmental research and public health, 12(1), pp.652-666.
Li, G.S., 2015. Research of Enterprise Financial Budget Management under Digital Environment.
Marek, T., Schaufeli, W.B. and Maslach, C., 2017. Professional burnout: Recent developments in theory and research. Routledge.
Purce, J., 2014. The impact of corporate strategy on human resource management. New Perspectives on Human Resource Management (Routledge Revivals), 67
Thomas, M., Kohli, V. and Choi, J., 2014. Correlates of job burnout among human services workers: Implications for workforce retention. J. Soc. & Soc. Welfare, 41, p.69.
Wang, Y., Wang, C. and Powell, W., 2017. Optimal Learning for Sequential Decision Making for Expensive Cost Functions with Stochastic Binary Feedbacks. arXiv preprint arXiv:1709.05216.
Zaman, M., 2017. The role of financial and non-financial evaluation measures in the process of management control over foreign subsidiaries–empirical evidence in Slovene multinational companies. Management: journal of contemporary management issues, 9(2), pp.53-73.
Prepare the references using Harvard referencing style.
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