Different Type of Budgeting Technique

Budgeting lies at the foundation of every financial plan. It doesn’t matter if you’re living paycheck to paycheck or earning six-figures a year, you need to know where your money is going if you want to have a handle on your finances. Unlike what you might believe, budgeting isn’t all about restricting what you spend money on and cutting out all the fun in your life. It’s really about understanding how much money you have, where it goes, and then planning how to best allocate those funds. Here’s everything you need to help you create a budget using different approach. a)Incremental Budgeting This is where the current budget and actual figures act as the starting point or base for the new budget. The base is adjusted for forecast changes to, for example, the product mix, sales volume, sales price, expenses and capital expenditure that are expected to occur over the next budget period. It is called incremental budgeting as the approach does not focus on the base, but focuses on the increment (the changes from the base). An example would include increasing last years operating expenses by the rate of inflation to calculate the new budgeted figure. The major disadvantage of this is that the major part of the expense (the base) does not change and in fact is overlooked and not questioned under this approach. For example the base figure may be distorted due to extraordinary events in the previous period which are not expected to reoccur. Thus if this is not taken into account, the budget could be misleading. Advantages of Incremental Budgeting Easy to implement If you are looking for a budget that is very simple to implement, incremental budgeting might be for you. You do not have to send your department managers to any special type of training in order to utilize this budgeting system. It is easy to learn and the process can be completed within a very short period of time. Gradual Change One of the benefits of incremental budgeting is that it allows gradual change for the business. If you value gradual change instead of trying to change everything quickly, this type of budget is ideal. Many times, if your business tries to change too fast, it can become unstable and lose sight of what it does best. There are some other benefit regarding the incremental budgeting: * Flexibility–This type of budgeting is very flexible. You can easily do it from one month to the next. This allows you to see change very quickly when you implement a new policy or budget. * Avoid conflict–Companies with many different departments often run into conflict between departments because of their different budgets. With this method of budgeting, it is easier to keep everyone on the same page and avoid conflicts between departments. * The model operates under a stable and predictable system and any change will be gradual. * Managers can operate their departments on a consistent basis. * Conflicts should be easily avoidable if departments can be seen to be treated similarly. It is Appropriate where there is a large number of cost centres/budgets to calculate and forecasts do not change significantly from one year to the next * Co-ordination between forecasts is easier to achieve. * The impact of change can be seen quickly. Disadvantages of Incremental Budgeting * It assumes that activities and methods of working will continue in the same way. * It allows no proper ince ntive for managers to develop new innovative ideas. * Its normally on an upward trend, hence providing no incentive for managers to reduce costs. It encourages spending up to the budget limits so that future estimates are maintained next year. * The forecast may become out of date and no longer relate to the level of activity or type of work being carried out. * The priority for resource allocation may have changed ever since the prior estimates were originally set. * May perpetuate past inefficiencies. In other words incremental budgeting does not cause serious challenge to the status quo of managers concerned because different methods of achieving performance objectives are not put to test * There may be budgetary slack built into the estimates, which is never reviewed. In other words Managers might have overestimated their requirements in the past in order to obtain a forecast which is easier to work towards, and which will allow them to achieve favorable results. * Does not account for change–This method is based on the idea that expenses will run pretty much as they did before. However, in business, this is rarely the case. There are always variables. * No incentives–Such a simple method of budgeting really does not provide your employees with much reason to be creative. They have no incentive to innovate and come up with new ideas or policies. When a budget allows a little extra room for innovation, you might find that your employees come up with something great. * Use it or lose it–Many employees view this as a â€Å"use it or lose it† system. They know that next year's budget is going to be incrementally based on this year's. Therefore, if they do not spend everything that is allocated to them, they may not have enough money to work with next year. This creates an environment where waste is encouraged. (b)Zero Based Budgeting his method was briefly popular during the 1970s but didn’t quite make it as a widely held practice. Yet in today’s current business set-up, the method is being revived and regarded as the better approach. ZBB starts off with practically nothing on which to base one’s budget assumptions. This stands in contrast to the traditional method, in which managers and supervisors calculate their proje ctions by using the previous year’s budget as their baseline. ZBB as a budget preparation method lost its popularity due to the numerous documentation requirements imposed. Managers and supervisors have to justify every projected cost and its purposes, plus the presentation of one or more alternative courses of action, which should be similarly justified. The procedure doesn’t end there, as every proposed budget and its alternatives have to be measured in terms of productivity and efficiency performance, including the results of cost-to-benefits analyses. Moreover, the manager is also required to present the consequences, in case a majority of the top management members would vote against the proposed cost projection. It’s no wonder that ZBB lost its following in its early years, since the procession of numerous calculations, justifications, analyses and documentation are indeed too tedious for comfort. But that was in the '70s, when computerization was still in its budding stage and personal computers were unheard of. Under the current business set-up, in which research and data analyses are common, all those requirements can be produced in a jiffy, by simply using business intelligence capabilities. Inasmuch as the best budget estimations are those that are closest to the real thing, zero-based rojections may finally come of age by getting the support it needs from today’s data marts and data warehouses. (Charles, 1995) Pros and Cons of Zero-based-budgeting This budget preparation method is actually a spin-off of the budget plans introduced during the 1920s. Due to the excesses and corrupt practices of local public officials, the federal government developed a system of controlling the disbursements of public funds by way of a revised budget plan. The success of this method encouraged other industries to adopt the same system. It was modified through the years, along with certain developments in the methods of accounting for manufacturing costs. However, as businesses grew and flourished, the financial managers and accountants became overly burdened by the processes involved in developing ZBB plans. Too much time and effort were being wasted in collecting, summarizing and analyzing recorded data, only to be set aside for future implementations, which oftentimes did not materialize. Despite this drawback, ZBB was regarded as a sensible approach because of its high degree of efficiency in controlling costs and maximizing productivity. In fact, government sectors and non-profit organizations still make use of the ZBB approach, as it allows each organization to visualize the incoming year’s performance based on present trends and conditions. In summarizing all documentation to support the master budget, redundancies in initiatives and functions become more visible and are thus eliminated. Although no longer popular, some industrial companies still make use of a zero-based budgeting approach on a per-department or per-project basis. This is particularly true if the departments or projects require a greater degree of cost leveling, inasmuch as their outputs do not directly contribute to business profitability Financial managers today are hardly affected by the re-emergence of this budget approach, as their trainings are basically founded on methodologies that make use of research and data analysis. Not only that, the advent of PCs and business intelligence applications and tools makes the preparation of supporting documentation as easy as pie, so to speak. All they have to do is click or double-click on their mouses and the BI financial report writers will simply drill-down, drill-around, and drill-through databases and data warehouses or even from web-based browsers to produce reports that will provide up-to-date information. There is spreadsheet integration and its capability to automate calculations, as well as the intelligent trees, process diagrams, and balance scorecards that can establish hierarchies, workflow mapping and key performance indicators. The drawback that was once attributed to the zero-based budget planning method has become part of its history, but its usefulness fits perfectly with the methodologies of the 21st century. (Cantoria, 2011) (c)Rolling Budget Businesses are increasingly using rolling budgets. Also called continuous budgeting, rolling budgets always involve maintaining a plan for a specified time period in the future. To implement rolling budgets, many advocate leveraging new technological resources, which means software. It must be understood that the technology (e. g. , bolt-on software packages) is not the solution. It is a tool by which and an environment in which management can have the opportunity to develop solution sets. Published surveys of financial officers of the largest industrial companies in the United States, Australia, Holland, Japan, and the United Kingdom show a number of interesting similarities as well as differences in budgeting practices across countries. (1) First, the use of master budgets is very widespread in all of these countries. Another significant finding is that financial managers in many countries distinguish between cost behavior patterns–variable versus fixed costs–for a common reason: They want to prepare more meaningful budgets by building flexibility into the model. How do these facts impact the concept of rolling budgets? Rolling budgets always involve maintaining a plan for a specified time period in the future. This result is achieved by adding a new time period in the future as the current time period that ended is dropped. Large companies, such as Electrolux and General Electric, prepare strategic plans and then integrate annual operating budgets that are divided into four-quarter rolling budgets, and smaller high-tech public companies, such as Keithley Instruments in Solon, Ohio, follow a similar pattern of planning. The annual operating budgets are prepared based upon best estimates of what management expects to occur and wants to achieve during the coming year. Flexibility is built into the process by considering how costs and revenues will change if different levels of activity occur (e. g. flexible budgeting), and each quarter's changes are made to reflect changes in the economic and financial environment–things such as what the competition is doing, how the economy is spending for capital goods, and any planned changes in their product mix (adding or dropping a product line). In short, sound managers operate an entity with one eye always on the horizon, and a well-prepared business plan as reflected in a â€Å"flexible rolling budget† can be one of the financial managers' best tools to assist them in their role of planning and controlling the operations of this company. For publicly traded companies, an earnings forecast â€Å"miss† can have an immediate and devastating impact on share price. And for both public and private companies, effective allocation of resources mandates that the organization have the best possible understanding of what the short-term and long-term future brings. The speed of change in today's economy has generated a trend toward adopting continuous forecasting as part of the planning process. While this type of â€Å"rolling forecast† offers many benefits, organizations often have trouble separating their forecast from and coordinating their forecast with the operational budget. Instead of truly forecasting–which ideally should be a higher-level projection–organizations end up preparing mid-year or even quarterly â€Å"re-budgets,† with all of the associated effort. The result is a budget that takes too much time and effort–not a forecast that provides vision and direction. Advantages of Rolling budget No More Free Ride The result: an always-current financial forecast that reflects not only the company’s most recent monthly results but also any material changes to its business outlook or the economy. In addition, it provides fewer opportunities for account directors to ride the coattails of past performance. Although traditional one-year budgets are still the norm at most companies large and small, many accountants argue that rolling budgets can be a far more useful tool. Unlike static budgets, they encourage managers to react more quickly to changing economic developments or business conditions. They discourage what is too often a fruitless focus on the past (â€Å"Why didn’t we meet our numbers? †) in favor of a realistic focus on the future. And they produce forecasts that, over the near term, are never more than a few months old, even when companies are rolling them forward on a quarterly basis—the more common approach—rather than REL’s monthly basis. Implementing rolling budgets doesn’t necessarily require any fundamental change in the way a company has been doing its budgets—except, of course, it no longer does the job just once a year. However, companies that decide to step up to rolling budgets may want to take advantage of the decision to make a change and consider what else they can do to improve the process. After all, if a company can get everyone on board to make such a fundamental change, a further nudge to make the process more effective and efficient in other ways may be possible, too. (Morrow, 2010) The Problem Of Relevance In the view of many accountants, traditional budgets too often are useless because they are out of date soon after they are assembled. Assuming that much of the decision making that goes into them gets done in the fourth quarter of the prior year, by the end of the following year, traditional budgets reflect thinking and data more than 12 months old. Not surprisingly, such documents tend to get short shrift from front-line managers. In worst-case scenarios, they can even promote behaviors and business decisions that are counterproductive. Consider the real-world example of a Fortune 500 company that has been talking with REL about how it might improve its forecasting to produce better financial results. The company uses a traditional static annual budgeting process in which it sets monthly sales goals for each of its products. If the company misses its sales targets in the first month, product managers will typically push those projected sales into the final quarter of the year. By doing that, corporate management is acting as if the outlook for the full year remains unchanged even though sales were off to a slow start. But if the slow pace continues and product managers begin to realize that their lost sales can’t be made up in the last quarter, they start to budget them out over all of the remaining quarters of the year. Frequently, they wind up running massive discounting programs at the end of each quarter to hit their annual targets. Fortunately, the company can afford such budget maneuvering because it enjoys relatively high margins on its products, but such manipulation isn’t maximizing its return on investment. Acting Rationally The static budget encourages managers to create artificial demand for their products, not end-user demand. In other words, the company stuffs its distribution channel and simply delays future shipments. If the company had a more realistic budget, product managers would be able to act more rationally, eliminating the last-minute forced discounts. Payne, 2010) Not only are static annual budgets restrictive, it turns out that many managers don’t really like them. Most of the clients complain that their current planning process is extremely painful and time-consuming. General manager of the Stanford, Connecticut, office of Parson Group, a national consulting firm focused on finance, accounting and business systems. Assuming the client is operating on a calendar year, everyone runs around feverishly in October and November to do budgeting, and then at the end of the process, they’re happy to get it over with—knowing they don’t have to do it again until the next November. Manage The Information Implementing a rolling budget involves more than going through the annual budgeting process four times a year instead of one. Because the time between budgets has been compressed, management must access and process information more quickly than it was able to do in the past. To do that, line managers must become more involved in the process and the company must embrace technology that will allow it to quickly capture and disseminate the raw data needed for decision making and forecasting. Most organizations today rely on Microsoft Excel spreadsheets to do their budgeting. They work, but they can be laborious, requiring finance managers to piece together input from all the operations managers throughout the organization. The process was slow and exhausting, producing a static and reactive product that was built on data that was typically at least six months old. Today, that company uses a specially designed budget planning, forecasting and analysis software product to do the job. (For a list of such software, see the sidebar â€Å"Software for Budget Planning and Analysis. ) This kind of software makes it easier for managers throughout a company to access, enter and share data on a real-time basis, using the Internet as a communications medium. â€Å"Managers used to spend a lot of time allocating expenses among different segments of the business. Since the new software automates the process, managers can spend more time analyzing the data. (Swaller, 2010) The Big Pi cture For public companies, the benefits of more timely and accurate budgets may ultimately extend beyond operations. Under Wall Street’s close scrutiny, meeting earnings forecasts has become more important than ever. A misstep, even one that’s just a penny per share below expectations, can translate into a sharp stock sell-off and, in the long run, drive up a company’s cost of capital. Theoretically, between rolling budgets and predictive accounting, companies can minimize the controllable factors that cause inaccurate earnings projections, Therefore, they would have fewer actual-to-forecast variations, which in turn would help cut down on stock price volatility. † Although no budgeting technique can predict the future, these techniques allow companies to get much closer to the ideal. The only holdback is the willingness of a company’s managers to use these new technology tools that are now available. Unfortunately, most â€Å"static† annual budget processes fail to provide a clear vision of the enterprise's impending direction. Forecasting allows organizations to close the gap between the overall strategic plan and the detailed operational budget. An ideal planning cycle includes an ongoing forecasting component that flows directly from the overall strategic plan and integrates with the operating budget. The output from this higher-level planning system then directly impacts the outcome of the detail budget. This principle of a continuous/rolling forecast that drives a target-based detail budget is a key financial component of many organizations' highest-level strategic planning process. The â€Å"Strategic Plan† involves many nonfinancial processes (competitive analyses, initiative-focused plans, and the like) and becomes the driver for the rolling forecast. The forecast translates broad-based initiatives into key statistical and operational factors and results. The operating budget, in turn, provides plans and budget-to-actual control functions at the lower levels of the organization (e. g. cost center) Another useful feature of the forecasting system is to visually portray trends of such metrics. For example, a forecast for product revenue might include the historic revenue-per-salesperson ratio and allow a manager to forecast this future rate, in combination with the expected number of salespeople, in order to determine future revenue (see Figure 2 for a parameter-driven forec asting layout). Statistic- or parameter-driven results provide a useful basis for review of the forecast. (Montgomery, 2010) DISADVANTAGES OF ROLLING BUDGET. 1. It is very expensive because of the elaborate set up of the budget department. . The budget might be so reviewed on such a manner that there will be no significance between the budgeted and actual results. The managers may tune budget to actual and it will not serve as a good yardstick 3. It requires account forecast of changes in economics, political, social ecological and business conditions. In practice this changes may not be ascertainable because of lack of statics. Above is the major limitation of rolling budget. 4. It is very expensive and elusive fro small organization. 5. It is cumbersome for data collection except where computer is in use. (d)Activity Based Budgeting Activity based budgeting is an approach to the budgeting process that focuses on identifying the costs of activities that take place in every area of a business or organization, and determining how those activities relate to one another. The data regarding those activities and how they relate to one another is used to establish goals that allow the organization to move forward. By understanding the relationship between all the activities of the organization, it is often possible to create realistic budgets for each department that are more equitable and in the best interests of the company in the long run. The concept of activity based budgeting is different from the process known as cost-based budgeting. Often, the cost-based approach relies on assessing the actual expenditures connecting with a previous budgetary period, and simply adjusting those amounts based on the current rate of inflation, or to account for changes in the amount of revenue generated. By contrast, activity based budgeting is more concerned with what is being done within the organization, how those actions or activities work together, and then allocating funds to each activity based on how much it will cost to successfully complete those activities. Brimson, 1991) Proponents of activity based budgeting see this approach as more realistic, since it involves looking inward at activities and costs rather than basing the budget on outward influences. From this perspective, this strategy is understood to create financial forecasts that are more accurate, and thus prompt the organization to make the most efficient use o f its resources. As a bonus, the analysis of each activity and its contribution to the ongoing success of the organization means that any activities that do not appear to relate to other activities within the organization structure may in fact be unnecessary, and can be eliminated without having an adverse effect on the overall operation. Those who favor a cost-based approach over the use of activity based budgeting note that this approach does not necessarily allow for the possibility of events such as an increase in the cost of raw materials or the need to replace outmoded equipment. According to this line of thinking, the inward focus of the activity based method only accounts for part of the data needed to develop a workable budget. Only when this inward analysis is coupled with consideration of outside factors that could exert some degree of influence during the upcoming budgetary period can the organization hope to draft a budget that is truly practical and likely to meet the needs of the organization over the course of the upcoming period. ( Gietzman, 1992) Disadvantages of Activity-Based Budgeting Complexity The many advantages of activity-based budgeting notwithstanding, this technique remains a comprehensive and time-consuming exercise. The process requires identification of activities, estimation of activity output demands, and estimation of the costs of resources needed to provide the demanded activity output. The budgeting of physical inputs and costs as a function of a planned activity requires the use of an activity-cost hierarchy and making estimates on the consumption by such activities. Activity-based costing bases itself on defining or analyzing the relationship among costs and activities, which might not always be possible. Even otherwise, the contextual information that plays an important role in shaping the results may not always be available or considered. Success of activity-based budgeting depends on a thorough and in-depth understanding of the business processes and an accurate activity analysis. Not all managers remain competent to perform such tasks, and the resultant distortions make the activity an exercise in futility. Resources Among the major disadvantages of activity-based budgeting is its consumption of organizational resources. Spending too much resource on an analytical function such as activity-based budgeting becomes counterproductive. The complexity of the activity-based budgeting exercise means that it takes away considerable organizational resources in the form of managerial time and money. Such resources, if deployed in a core operational activity, would contribute to a much better bottom line. The broad scope of activity-based budgeting invariably necessitates an activity-based budgeting software, as well as training all managers to use the software and learning how to make correct activity analyses, adding to the resource demands. Duplication A major limitation of activity-based budgeting is that it is not a control budget and as such does not replace the department or line-item budget. Activity-based budgeting only provides supplemental information, and it acts as a panacea rather than a tool. It therefore does not eliminate or substitute any process but adds to the administrative functions of an organization. Short-Term Focus Finally, another major activity-based budgeting disadvantage includes its tendency to focus on the immediate and short term and ignore the long term. Activity-based budgeting uses historic data for forecast analysis, which may not always be practical. Focusing on activities that create immediate results might work well in the short term, but might cause long-term damage to an organization. While activity-based budgeting helps the organization if implemented with the correct data, preparing an activity-based budget with distorted data runs the risk of arbitrary budget cuts and creates a dysfunctional organization. (Morrow,1991) Behavior Aspect of Budgeting A main problem involves a variety of behavioral conflicts that are created when the budget is used as a control device. To be effective, the budget must be used by the managers it is designed to help. Thus, it must be acceptable to all levels of management. The behavioral literature on budgeting supports the view that the budget should reflect what is most likely to occur under efficient operating conditions. If a budget is to be used as an effective planning and monitoring device, it should encourage a high level of performance and efficiency, but at the same time, it should be fair and obtainable. If the budget is viewed by managers as unfair, (too optimistic) it may intimidate rather than motivate. One way to gain acceptance is referred to as participative (rather than imposed) budgeting. The idea is to include all levels of management in the budget preparation process. Of course this process must be coordinated by a budget director to ensure that a fair budget is obtained that will help achieve the goals of the total organization. Rahman,2011) Another way to reduce the behavioral bias against budgeting is to recognize the concepts of variation and interdependence when using the budget to evaluate performance. Recall from our discussion of the statistical control concept in that there is variation in all performance and most of this variation is caused by the system , (i. e. , common causes) not the people working in the system. The concept of interdependence refers to the fact that the various segments of a company are part of a system. Inevitably, these segments, or subsyst ems influence each other. Failure to adequately recognize the interdependencies within an organization tends to cause behavioral conflicts and motivate participants to optimize the performance of the various segments (subsystems) rather than to optimize the performance of the overall system. THE ‘BEYOND BUDGETING' MODEL – PRIVATE SECTOR In the private sector, managers are forced to consider current and future opportunities and threats, particularly where rolling monthly forecasts of financial performance operate together with a focus on other non-financial ‘value drivers'. In essence, the ‘beyond budgeting' model entails devolved managerial responsibility where power and responsibility go hand in hand. The view held by proponents of the beyond budgeting model is that the following benefits may accrue as a result of its successful application by management: (Johnson,1995) * It creates and fosters a performance climate based on competitive success. Goals are agreed via reference to external benchmarks as opposed to internally-negotiated fixed targets. Managerial focus shifts from beating other managers for a slice of resources to beating the competition. It motivates people by giving them challenges, responsibilities and clear values as guidelines. Rewards are team-based, in recognition of the fact that no single person can act alone to achieve goals. * It devolves performance responsibilities to operational management who are closer to the ‘action'. This uses the ‘know-how' of individuals and teams interfacing with the customer, which in turn enables a far more rapid adaptation to changing market needs. * It empowers operational managers to act by removing resource constraints. Key ratios are set, rather than detailed line-by-line budgets. For example, gearing and liquidity ratios may be used to show there is enough cash in the bank to meet liabilities. Local access to resources is thus based on agreed parameters rather than line-by-line budget authorisations. This is aimed at speeding up the response to environmental threats and enabling quick exploitation of new opportunities. * It establishes customer-orientated teams that are accountable for profitable customer outcomes. These teams agree resource and service-level requirements with service departments via the establishment of service level agreements. It creates transparent and open information systems throughout the organisation, which should provide fast, open and distributed information to facilitate control at all levels. The IT system is crucial in flexing the key performance indicators as part of the rolling forecast process. THE PUBLIC SECTOR The legal framework of public sector organisations would probably prevent such a system being introduced. As with al l alternatives, the success of a particular process depends on the needs of the individual organisation. The alternative of the beyond budgeting model places considerable emphasis on the need for organisational, managerial and cultural changes in order that it may be successfully applied by organisations. This will present considerable behavioural challenges and individual managers might become overwhelmed by the complexity of decision-making in such an unregulated decision-making environment. In the public sector, the budget process inevitably has considerable influence on organisational processes, and represents the financial expression of policies resulting from politically motivated goals and objectives. Yet the reality of life for many public sector managers is an increased pressure to perform in a resource-constrained environment, while also being subjected to growing competition. In essence, a public sector budget: * establishes the level of income and expenditure * authorises that expenditure, once agreed, out of the planned income * acts as a control on expenditure and income * communicates policies and plans * focuses attention on the future * motivates managers and staff. While these issues may be common with the private sector, a number of issues arise which are specific to the public sector. For example, UK local authorities are prevented by law from borrowing funds for revenue purposes or budgeting for a deficit. If the beyond budgeting model is to allow greater freedom for managers then it will take a considerable change of mindset in the public sector to achieve the flexible agenda envisaged, especially where such flexibility would involve considerable and increased delegation to managers. One wonders therefore, from a behavioural perspective, if such managers are capable of making this change, as it would entail the adoption of a radically different approach. Local authority financial regulations also tend to prevent the transfer of funds from one budget head to another (otherwise known as virement) without compliance with various rules and regulations. These rules (expressed in the financial regulations of public sector organisations) will be consistent with the policies of the organisation and are designed to prevent expenditure on items such as permanent staff where such costs would go beyond the budget year and represent a commitment of future resources. Budgets in the public sector tend to concentrate on planning for one financial year ahead. Attempts are being made by UK central government, through the comprehensive spending review, to place an emphasis on the longer-term. However, considerable difficulties exist within the individual organisations that make up the public sector when creating a budget system that reflects longer-term objectives and goes beyond the annual cycle. It also remains to be seen how the relatively new system of resource accounting in central government will fit into the budgeting framework. Traditional methods of budgeting in the public sector centre on the bid system and incremental budgeting. These approaches focus on changes at the margin and generally reflect acceptance of the budget base from the previous year. This is partly a reflection of the size and complexity of public sector organisations, but also the internal political power of large departments, which protect their positions through their relative strength. Bid systems also minimise conflict, as debate and power struggles are only concerned with the ‘incremental' items. More advanced approaches are represented within financial planning systems, and include such concepts as zero-based budgeting and planned programme budgeting systems with a timeframe greater than one year. Whether the public sector can adapt to the concept of greater flexibility – which lies at the heart of beyond budgeting – remains a matter of ongoing debate. Such an adaptation would require a mindset which not only moves away from control but also requires a reduction in the internal political power of large departments which has been at the heart of public sector budgeting for many years. The desire to generate improved performance – essentially considered the driver for the beyond budgeting model – is present in the public sector evidenced in initiatives such as key performance indicators and ‘best value' plans. But this is not matched by a desire for the flexibility inherent in the model. In terms of beyond budgeting, managers in such organisations are likely to remain constrained by the inability of their organisation to change. Finally, the behavioral conflicts associated with budgeting are reduced by using flexible budgets when evaluating performance Other factors affecting behaviour Dysfunctional behaviour may be caused by the following budgetary problems: †¢ Budget targets that are perceived by employees as too difficult to attain will result in resentment and a feeling of stress. †¢ Budget targets that are perceived by staff as too easy to achieve do not provide a challenge and may lead to a slipshod performance by staff. †¢ Managers may experience a loss of autonomy by being hemmed in by the budget and not having sufficient flexibility to use their own initiative. †¢ Managers may become narrow minded, focusing only on their own department, and create disadvantages for the organisation as a whole. The emphasis on financial goals to the detriment of non-financial goals may havea debilitating effect on the organisation. Budgetary slack or sometimes it is referring to budgetary bias, is a common process where implementer intentionally underestimates revenue or overestimates expenses in the tight budget. Managers may attempt to create budgetary slack in three ways. Managers may deliberately underestimate the production or sales budgets potential. For example, the sales budget for the month of July is RM 1 million. If the manager is able to achieve the target budget then the sales budget for the following month will be increases to RM 1. million. Manager creates budgetary slack by undervalue the budget so that the budget for August will be easier to achieve although they are able to hit the tight budget. Manager may also attempt to achieve slack by cost overestimation. They purposely used more than the budgeted expenditure so that the budget will be increases for the following months. After that they spend less than the budgets to shows that they have improve in their performance. For instance, the cost budget is set to be RM 1 million in January. Then the manager spends RM 1. 2 million in their expenditure so that the cost budget will be increase to RM1. million in February. Subsequently, they spend only RM 1. 1 million i n March which is RM 0. 1 million lesser than February to prove that they have better performance. Moreover, manager may use up all the budgets to pretend that there is no slack in the recent budget. Manager may waste his extra cost budget on non-essential expenses. Let say the cost budget is RM 2 million for March, the manager will try to finish his allowance although he only spend RM1. 8 million. This may cause by the fear of the manager that the future budget will be reduces unless the allowance is fully utilise. Rahman,2011) We see the behavior aspect of budgeting as having particular relevance for knowledge-based companies which are increasingly a feature of a developed economy. Other companies may see specific benefits in such a system, given the rapidly changing environment in which they also operate. These changes will not be introduced without conflict and difficulty due to the challenges faced in introducing change. Such challenges may be beyond the achievement of the publi c sector, due to the expression in the budget of politically-motivated policies and objectives eveloped within a complex legal and financial framework. What we can say, however, is that if we are to see the successful application of the beyond budgeting model in both private and public sectors, then this must be underpinned by a considerable organisational, cultural and managerial change. Otherwise it is doomed to failure. (John, 1995). References * Brimson, J&Fraser, R. (1991), The Key Feature of ABB, 42-43 * Cantoria. c. s, (2011)Walking Through an Example of Creating a Zero-Based Budget * Gietzman, MB,(1992) The Development and Design of An Activity Based Budgeting System, Initial Experience. Johnson, HT. (1988)Activity Based Infromation:A blue Print for World Class Management. 23-30 * Johnson, S. (2005), Beyond Budgeting, Retrieved from, http://www. acca. co. uk/students/acca/exams/p5/technical_articles/2950520 * Lynn, M. P, Madison, R. L,(2004) A closer look at rolling budgets: the challenges associated with an effective implementation of rolling budgets are management challenges, and software technology can only become part of the solution when managers are ready to use it to enhance their decision making * Montgomery,P. 2010) Effective rolling forecasts: Make sure your projections are high-level strategy and not just a Rehash of the operating budget. (Budgeting/Forecasting). * Morrow, M & Connolly,T. (1991)The Emergence of Activity Based Costing. 38-43 * Randy Myer(2001), Budget on a Roll, Retrieved from http://www. journalofaccountancy. com/Issues/2001/Dec/BudgetsOnARoll. htm. * Rahman, K. A. (2011) The Pattern of Behaviour in Response to Budgeting. * Sargent,Charles W. PH. D. (1995), Zero-Base Budgeting  and the library,   http://www. ncbi. nlm. nih. gov/pmc/articles/PMC225295/pdf/mlab00085-0055. pdf

DEP GARD Case Study Essay

When reviewing the Supply Chain design for DEP/GARD, there are various stages which add value, and some which fail to add value. Looking at figure 1. below, you will see the diagram outlining the supply chain value stream enabling DEP to delivery product to GARD. Areas which fail to add value, and have the potential to erode DEP’s ability to remain a valued supplier for GARD include the following: 1. Failure to utilize LEAN manufacturing principles causing DEP to carry excess inventory: Inventory shortages which caused shutdowns leading to DEP to abandon LEAN principals look to be primarily driven by a lack of structured supplier management. Suppliers of key raw materials were selected based solely on price, with DEP neglecting the critical service component of their supplier’s delivery capabilities. This lack of consistent and reliable delivery required DEP to carry excess safety stock, increasing their inventory carrying costs, and reducing the ability to produce on a JIT basis. 2. Manual order receipt and handling process: Orders are placed via fax and phone to the marketing and sales department, at which time orders are manually entered into the order information system. Lost faxes, order entry personnel entering an order incorrectly, or even being distracted by another priority leading to failure to enter the order at all; these are all potential failures by not having a more up to date, automated ordering processes with their customers. 3. Inconsistent timeline to complete pick, pack, and ship process at the distribution warehouse: There is a three day variation in the time it takes for an order to leave the warehouse once it is received from manufacturing. Without additional details, I cannot comment on the cause for this long time fence, however from a high level overview, I’m using the assumption that the warehouse follows generally a similar process to perform their tasks to enable final shipment, thus a 3 day variation in the time it takes to complete these tasks seem to degrade value. 4. Twice-a-week delivery options for customers within 200 miles of DEP: This appears to show a lack of flexibility on the part of DEP in terms of delivery capabilities to local customers. Assuming a Tuesday and Thursday delivery schedule, and order that is ready to ship late Thursday (possibly missing the fleet truck leaving the warehouse), now will not ship until Tuesday the following week, adding three business days to the total performance cycle to the order. Stages which are value added: 1. Same day movement of produced finished goods to warehouse 2. Utilization of DEP fleet trucks to make deliveries to short distance customers Figure 1. Upon reviewing the primary suppliers of polymer feedstock for DEP, specifically the suppliers awarded with 60% of the volume, I am able to calculate a maximum performance cycle of 25 days to deliver product to GARD. Assuming inventory is NOT available for some reason requiring an order from polymer suppliers, the longest lead time to receive polymer is 9 days from the 60% suppliers. To receive, process, and produce the material for the customer order, you then add 8 days, as this is the longest production cycle time. Orders are sent to the warehouse, prepared for shipping, and another 6 days may elapse before the order is actually shipped. Using the assumption that GARD is within the 200 mile radius, the longest time that delivery may take place based on twice a week deliveries is 2 days. This gives us a total of 25 days. Vice versa, when looking at the minimum performance cycle for this total supply chain, I calculated a 10 day cycle. DEP has abandoned LEAN principles and stores 7 days’ worth of inventory on hand at all times. Based on this, my assumption is that inventory is immediately available to begin production of the customer order. DEP has a minimum production time of 6 days from receipt and processing of the order to completed production. Material is immediately moved to the warehouse and prepared for shipment. This process takes a minimum of 3 days to complete and ship the order. Similar to my assumption used in calculation of the maximum performance cycle, I assume GARD is within the 200 mile radius. I’m also using the assumption that DEP can make deliveries on the day an order is processed and ready for shipment, provided the order is prepared in sufficient time, thus giving a 1 day shipping time in a best case scenario. This calculates to a 10 day minimum performance cycle. Looking at the total supply chain, it is possible to improve the consistency of the performance cycle; however, due to the fact that the production process from order receipt to finished product takes 3-6 days, the minimum performance cycle could not be improved. By simply switching to primary use of the 25% and  15% polymer suppliers, there would be opportunity to receive several of the raw materials in as low as 2 days, however if DEP were to shift back to a JIT process, this would simply add two days to the overall current minimum performance cycle (currently, inventory is already on hand), instead of improving the cycle time. For products E and F, the minimum lead time is 4 days, still negating opportunity for improvement. Automated ordering systems (online, vendor managed inventory, etc) would allow for a more consistent process and reduce opportunities for manual failure on the part of DEP, to theoretically narrow the gap from the current 3-6 days to produce finished product from the time of order placement. Similarly, shifting to a delivery cycle of daily shipments for customers within 200 miles would also reduce variability in delivery times. If I were Tom Lippet in this scenario, there are several changes I would make, some of which I have touched on previously. Current inventory strategies may not be the most optimal in terms of cost, however Tom’s concern is of service to GARD, as pricing is already in line with market competitors. Based on this and due to the variability in supply time consistency from polymer raw material suppliers, I would not make any changes to inventory strategies. However, due to the variability in the time it takes to produce product from the time of order, as well as the variability in the time it takes to process an order for shipment at the warehouse, I would work with supply chain leadership to request a detailed value stream map of the entire internal supply chain process, to highlight the key areas causing such variability and work to implement improvement strategies to shorten these times on a consistent basis. In terms of shipping, I again would work with supply chain leadership to analyze the cost-benefit impact of either moving to ta daily delivery route with the DEP truck fleet, or look at the opportunity to supplement utilizing common carriers where DEP trucks are unable to delivery in the shortest time window possible. In order to â€Å"sell† Richard Binish on DEP’s capabilities to deliver consistently within the service level criteria now required by GARD, I would highlight critical improvements being implemented by DEP to better align capabilities with Richards service requirements from key suppliers. Obviously, price is a common qualifying criteria component, and I would need to ensure that these improvements made within DEP’s supply design did not raise costs to the point of eroding  margin or requiring a price increase to the level of pricing ourselves out of the GARD business. Product quality is also critical, but we already know that DEP product is in line with competitors in terms of quality, thus making it somewhat of a â€Å"commodity† product. Price and service will be the critical components. I will need to visually show demonstrated improvement in delivery service since these improvements were implemented as compared to historical service to GARD. Assuming that these improvements were successful, there theoretically should be a much higher demonstrated performance level within a tighter service window. In closing, Supply Chain management plays a critical role in the overall commercial success of a business. Setting proper service expectations and maintaining levels within that range is critical to maintaining share with key customers. Analyzing gaps in those performance expectations from a customer against actual capabilities, and actively working to close the gaps should be an ongoing process.

Information Policy Essay Example | Topics and Well Written Essays - 500 words - 4

Information Policy - Essay Example In the opt-out system, Google could sell the book unless the copyright owner objected. Orphan work was also another issue of contention in the settlement. Google could sell the orphan works until the owner of the work showed himself. The owner of the work would be paid their share when they came forward. Was the court justified to reject the settlement despite the fact that it was after an agreement between Google and copyright owners? Based on the existing copyright laws, was the opt-out system proposed by Google in line with the existing laws? Bearing in mind that exceptions where the opt-out system is allowed, was the opt-out system beneficial to both parties and should it be added to the list of opt-out exemptions in the copyright law? How should orphan works be used? Should Copyright law apply to them? According to Swygert and Earle Yanes (1998), disputants will always rearrange their entitlements, rights, and liabilities in a manner which produces gain in their combined wellbei ng if they have perfect knowledge of all the alternatives, and transaction costs are zero. Can the Coase theorem be used to resolve copyright disputes such as the dispute between copyright owners and Google? Suppose the settlement between Google and Copyright owners was agreed on by the Court how would piracy affect such an agreement? How does piracy affect Copyright? According to DeNardis (2015), a search engine algorithm is one way to enforce trademarks and copyrights. The search engine ranks sites using algorithms, where sites with low ratings are blacklisted or shown lowest in the search. A three strike policy is also recommended whereby ISPs deny users who violate copyrights or trademarks Internet access. However, the UN indicates that the policy is against human rights. Another way of safeguarding copyright and trademarks is to switch off domains. The Immigration and Customs Enforcement (ICE) investigates domains that violate copyrights or trademarks

Electronic Healthcare System Issues Research Paper

Electronic Healthcare System Issues - Research Paper Example This paper is a report on electronic healthcare system that analyzes and assesses the challenges that are part of the electronic system. It will also explore ways that can be appointed to overcome the challenges will also be addressed in the report. The paper is assisting managers in the healthcare dealing with information and data management operations. It will guide the professionals to manage their healthcare system in an effective way. Body Content Risks and Opportunities involved in sharing Clinical Data In healthcare there are several risks involved in patients’ exchange of information. There are some external and some internal risks involved in client’s data sharing. There are risks of patient’s identity exposure, identity mismatch or conflict, and data stealing which could result through clinical data exchange. Similarly, there are simultaneous risks involved of identity fraud, distortion of patients’ healthcare record, and distortion of patientsâ €™ medication record through healthcare data exchange (American Medical Association, 2013). The responsibility and obligation lies on healthcare organizations, that they protect patients’ personal information by making their electronic health system protective and secured. If information systems are highly protective, they can ensure the safety of patients’ personal records and data. For healthcare organization, information is an asset which if gets managed is a value to the organization and if gets lost or detracted is a complete threat to the organization (American Medical Association, 2013). In healthcare information integration is an essential thing required which is achieved by means deliberated data exchange. Exchanging patients’ personal clinical information links all the departments together. The departmental coordination makes patients’ care highly qualitative. This is one major opportunity that lies with clinical information sharing (America n Bar Association, 1994). On further, data pooling (sectional data sharing) comes out valuable for research departments of the healthcare organization. This operation is made possible through sectional information sharing. Looping information from one period of patient trial to another is enabled through data exchange. Conducting a clinical research gets easier when pooled information is available on the research desk. Information sharing provides data to researchers which can further be used for scientific argument (American Bar Association, 1994). On further, information sharing keeps departments proactive. When the information required for patient’s treatment is available at the right time, the treatment gets effective as it is done on the real time basis. This is an opportunity which usually most healthcare organizations avail through sectional data sharing. According to Deborah Zarin (the director at the National Library of Medicine), information sharing brings transpare ncy in health care operations (National Academy of Sciences, 2013, p. 4). It brings transparency on how well the patients are provided treatment and care. Information sharing also gives the opportunity of patient’s retrospective analysis as it allows the data exchange of patient’s past record of trials. Opportunities are there on the line with electronic health information sharing but it is on the organization’

Clinical immunology (ELISA TYPES) Essay Example | Topics and Well Written Essays - 750 words

Clinical immunology (ELISA TYPES) - Essay Example Figureure 1: The targeted antigens that are found in the wells are attached to the labelled antibodies where substrate is added in order to form a reaction with enzymes conjugated antibodies form a yellow colour in case of positive results and for negative results, blue. Monoclonal antibodies are obtained from single B-cell clones and they one biding site only that can recognize a single epitope of the antigens. These are prepared through the use of specificity desired by the hybridoma technology that is used to develop cells that are immortalized which can secrete the immunoglobulin desired (Nairn, 2002). On the other hand, the polyclonal antibodies come from immunised animals, obtained from various B-cells and they have heterogeneous collections of binding sites that help to recognize different epitopes (Kindt, 2006). Sandwich ELISA; certain monoclonal antibodies are found attached to walls of microtiter plate where the serum specimen is put to the wells so that they can be tested for complementary antigen’s presence. Where the antigen is present in the given specimen, it binds the monoclonal antibodies. The other antigens or molecules that are not bound, by the monoclonal antibodies are then washed away. Enzyme conjugated antibodies also known as secondary monoclonal are added and they are washed without any bond. The reason is that the enzymes that are conjugated to the monoclonal antibodies have receptors that are designed in such a way that they produce colour changes in the event that substrates are added. In the event that the antigens suspected are present, a complex of primary monoclonal antibodies, antigens and enzymes conjugated antibodies are formed and they will cause colour changes after substrates are added. The final results are then measured using optical technology. Colour does not change to yellow if the suspected antigens are not present where a

Formal Education Assignment Example | Topics and Well Written Essays - 1250 words

Formal Education - Assignment Example This essay discusses that in a complex society, committed educational institutions are a requirement, even though Illich (1970) indicates persuasively that they are not. On the other hand, being taught something properly is never better than second-best. The error is always committed by people who recommend ever more accessions to the standard curriculum, like "citizenship", "managing personal relations†. "Pass/Fail† by Linda Pastan You will never graduate From this dream Of blue books. No matter how You succeed awake, Asleep there is a test Waiting to be failed. The dream beckons With two dull pencils, But you haven’t even Taken the course; When you reach for a book - It closes a door In your face; when you conjugate a verb - it is in the wrong language. The above lines from the poem reveal the concealed theme reflecting the real modern trend of learning. The poetess says that man can never free himself from the dreams of success and failure. Both are the two sides of a coin. One ceases to exist in the absence of the other. The dream of passing or failing is something from which we can never free ourselves. So, the right approach is to do and leave it to God. The situation of â€Å"To be or not to be†¦..† is to be entertained by all. Dwindling among things and hanging in the balance will not set us the right path. The subject of success and failure is such that even if we try to forget it and sleep, we are sure to dream about verbs, vocabulary, etc., which will boomerang only for the worst. However, the solution to such problem remains concealed.

Business plan Essay Example | Topics and Well Written Essays - 2250 words - 1

Business plan - Essay Example Thus, a business plan is essentially a road map for the organization to achieve its stated objectives (Tyson and Schell 2008). A bird’s eye view of the new institution and the education it proposes to impart With a veritable explosion in globalization and consequent exponential increase in business activities that span across continents and political frontiers the need for suitably educated and properly trained individuals to manage such gargantuan work load in an efficient and effective manner has also increased manifold. People who have an MBA (Masters in Business Administration) are equipped with precisely those skills that are required to manage transnational corporations and thus the craze for obtaining an MBA degree is increasing by leaps and bounds with each passing day (Scalzo 2008). GSBM intends to impart these much needed skills to young individuals who aspire to be dynamic managers of tomorrow. Thus, the mission statement of this new institution would be: To make st udents aware of the techniques and tools of management and how they could be applied in practical contexts To encourage students to develop their independent line of thinking and foster innovative ideas regarding various management issues and situations To adequately equip them to navigate the extremely competitive environs of global business To make students aware of cultural differences that exists across countries and continents as that is extremely necessary to successfully conduct a global business. The subjects that are intended to be taught at GSBM would include strategic management, marketing management, human resource management, adequate knowledge and expertise in finance and accounts, proper induction in the nuances of information technology, imparting the tools and techniques employed by managers in collecting business, and, most certainly, a sufficient knowledge about diverse cultures as cultural competency of an organization is imperative to survive and prosper in glob al market conditions. There is an immense impact of culture on negotiating process as negotiating practices vary from culture to culture and the manner in which people conduct themselves during negotiation process depends almost entirely on the cultural context of each country (Weiss 1994). Thus having a broad idea about prevailing cultures and being careful not to transgress the sensitivities of people belonging to alien cultures is an important lesson that any aspiring global manager needs to learn (Salacuse 1991). Market analysis of the proposed business school The institution would be a business school funded through private investments and would commence its operations initially in London with subsequent plans to open up subsidiaries, franchises or branches in Australia and India. The level of education and the course content would be totally at par with what is being