The Role of Budgeting in Enhancing Performance Evaluation in Business Organization (Term Paper Sample)

The Role of Budgeting in Enhancing Performance Evaluation in Business Organization
Contents TOC \o "1-3" \h \z \u Introduction PAGEREF _Toc42541034 \h 2Problem Statement PAGEREF _Toc42541035 \h 4Performance evaluation PAGEREF _Toc42541036 \h 5Using the budget to measure the organizations performance PAGEREF _Toc42541037 \h 5Main Types of Budget PAGEREF _Toc42541038 \h 6Fixed and Flexible Budget PAGEREF _Toc42541039 \h 6Other common Types Budget PAGEREF _Toc42541040 \h 7The Principal Budget Factors PAGEREF _Toc42541041 \h 7Performance and Budgeting PAGEREF _Toc42541042 \h 8Integration of Performance evaluation into the Budgeting PAGEREF _Toc42541043 \h 9Budget Constrained in performance evaluation. PAGEREF _Toc42541044 \h 10Related studies PAGEREF _Toc42541045 \h 11Conclusion PAGEREF _Toc42541046 \h 11Reference PAGEREF _Toc42541047 \h 13
The Role of Budgeting in Enhancing Performance Evaluation in Business Organization
Introduction
Performance management always involves budgeting, performance evaluation, and incentive compensation (Savignon, Costumato & Marchese, 2019). Following the uncertainties predominant in most countries business environment today, managers and stakeholders must calm to compete favorably under these rapidly changing circumstances (Alexandra & Edheku, 2020). In order to survive under these environmental difficulties, managers and shareholders of the organization need a sharp tools, proven management techniques to forecast the major changes which are likely to affect the organizations while they choose future directions and dimensions of resources needed to attain selected goals (Nuti, Ferré, Seghieri, Foresi & Stukel, 2020). Budgetary control as a proven controlling tool helps organization management, enhances improved performance of any economy in a diverse ways. Its main purpose is to serve as a guide in business planning operation; it also creates limits for departmental extremes. It helps managerial officials to make cautious analysis of all existing actions, thus qualifying, expanding, eliminating or restricting present practice (Alexandra, & Edheku, 2020).
Budgeting and control entails a separate pattern of decisions in an organization which is capable of defining its objectives, purpose or objectives, and how these objectives are achieved by establishing principal policies and plans (Gamayuni & Hendrawaty, 2020). However, the incapability to recognize the problem concerned and fixing a boundary of investigation makes an obstacle for the effective implementation of budgeting and control. Some of the organizations only look for narrow ranges of choices which they arrive at from their past experiences and present circumstances, other management levels even avoid long-term planning and budgeting in favor of current problems thereby making the complications of tomorrow more severe Kenno, Lau, Sainty, & Boles, (2020). The foregoing reflects on the need for organizations to set up a formal mechanism for look over its situation for opportunities and give early signs of future problems, this course of action will certainly improve the structure of budgeting and control, resulting in an a priori expectation of improved performance in the hospitality industry and in organizations for that matter (Mauro, Cinquini & Pianezzi, 2019).
The primary characteristic of the organizations all over the world involves setting goals to which money are connected or allocated. From these goals, specific objectives are delineated and funds are subdivided among them. Budgeting also provide evidence and data of past performance and thereby proceeds to allow for important comparisons between „expected‟ and „actual‟ progress. Adjustments are at times prepared to the current budget or the future budget measures set to close any performance gaps that may exist. Above all the budget provide a dynamic tool for project evaluations, for any ad hoc many measures to be taken if the need arise which is an omportant tool for decision makers, more especially the management and main panel associates of the organization (Tamaș, Barbu, Rakos & Solomon, 2020).
According to (Tamaș, Barbu, Rakos & Solomon, 2020) budgeting will serves as:
* An indicator of costs and revenues that are linked to the daily operational activities of the project managers in the various camps of operation
* A way of providing information and supporting management decisions throughout the year
* And a means of monitoring and controlling the business, particularly analyzing the differences between the budget and actual. The origins of organizations budgeting always originate from the scope of work in the tender document of the client. And tender budget is then intended form this scope of work which inform organization decision on the viability of the prospective plan, whether to bid or not to bid. The source of income on this budget originate from various sources whilst the cost of sales normally, is a constitute of senior 9and junior catering consumptions, shop and bar consumption, expediting expenses, party catering consumption and that of cleaning. Also included in the cost of sales are food spoilage, stock variance, and non-stock consumables.
Budgeting is, traditionally, classified under management accounting domain by the existing accounting literature. In this sense, budgeting is a narrower concept with more specific focus. (Hansen & Van der Stede, 2004). budget focuses on a forthcoming accounting period, rather than on the past period on which accounting is based to make records. Therefore, budget planning focuses more on a forecast purpose to estimate what is likely to occur and how organizational resources are allocated to realize future operations(Alexandra, & Edheku, 2020). Moreover, another important aspect of budgeting will be that of the feedback, in which both the plan and the action will be compared, providing the opportunity to revise future budget in line with experienced.
Budgeting in finance literature is concerned with the planning and management of firm’s financial needs, concerning the alternative sources of and cost of finance. The financial needs of the firms are embodied in capital budgeting decisions on projects within the firm. The money flow are from the capital market into the firm and into the project, the project in turn generate