Beyond Budgeting

Question 1

What are common features of beyond budgeting?

Answer 1

Rolling budgets

Benchmarking

Future focus

Innovation is encouraged and rewarded

Participation

Question 2

What is a rolling budget?

Answer 2

Produced on a quarterly or monthly basis, alternative option to annual budgeting.

They are flexible, do not rely on outdated figures and should result in more timely allocation of resources. Which means budgets are quickly adjusted for changes in the business.

Question 3

What is benchmarking?

Answer 3

target often set based on external benchmarks. e.g. if competitor can achieve 70% capacity utilisation, then this should be the benchmark for Halfpenny.

Question 4

What is future focus?

Answer 4

Greater focus on determining and explaining what might happen in the future rather than past events.

Halfpenny currently focuses on understanding historic variances, matching actual performance against budget.

Question 5

What is meant by participation?

Answer 5

Budgets are set at a local level rather than being prepared centrally.

Question 6

Benefits of beyond budgeting

Answer 6

Planning - planning is continuous and the organisation is more likely to be proactive

Customer focus - targets become more challenging and market focused. They stretch staff and encourage them to find better ways of doing things.

Innovation - Organisation is likely to become more innovative and continuously improve.

Participation - Managers are more involved in the decision making process, providing better information as well as more motivation for managers.

Better IT systems - created information systems which provide fast and open information throughout the organisation