Budgetary systems Flashcards
what is single loop feedback
is control like a thermostat, the plan or target is not changed but the resources may need to be reviewed
what is double loop feedback
information used to change the plan itself.
3 features of strategic performance reports
produced periodically
compare strategic position vs overall business plan
use info from in and out of organisation
4 features of management control
may be monthly
compare actual vs budget plan
formal feedback systems for reporting
based on feedback from within organisation
3 features of operational level
control measures reported regularly
compare actual performance vs standard
sometimes non financial info
what is incremental budgeting
this is where the budget is based on the current years budget plus an extra amount for estimated growth or inflation
2 advs of incremental budgeting
cheap and simple
relatively quick to administer
5 disadvantages of incremental budgeting
doesn’t identify inefficient operations
budgetary slack will be introduced
unsuitable for changing environments
it encourages managers to spend up the budget
doesn’t produce challenging performance targets
what is zero based budgeting
a method of budgeting that requires each cost element to be specifically justified
3 steps for ZBB
define the decision packages
evaluate and rank each activity
allocate resources
4 adv’s of ZBB
its possible to identify and remove inefficient or obsolete operations
it enables you to have a close examination of all operations
results in more efficient allocation of resources
it responds to changes in the business environment
disadvantages of ZBB
volume of extra paperwork
management can’t forsee all possibilities
management may need to be trained in ZBB
the ranking process can be difficult
what is a rolling budget
a budget continuously updated by adding a further accounting period when the earliest accounting period has expired.
advantages of a rolling budget (5)
rolling budgets focus on detailed planning and control on short term prospects so uncertainty is smaller
managers have to regularly reassess the budget
planning will be based on recent plan
a realistic budget will be more motivational for management
encourages managers to think about the future
disadvantages of rolling budgets (2)
effort and expenses are required to continuously update the budget
it may demotivate managers if they cannot see the benefit of continously updating
