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Strategic Business Management by Gary Cokins

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10

WHAT’S BROKEN ABOUT BUDGETING?

How many people in your organisation love the annual budgeting process? Probably none. The mere mention of the word budget raises eyebrows and evokes cynicism. As a simple test, how many options in Box 10-1 would be checked off as applicable to your organisation? If you check all, you are not alone.

Box 10-1: A Quiz. ‘Our budgeting exercise...’

Source: Copyright Gary Cokins. Used with permission.

What is broken about the annual budgeting process? We will more deeply discuss some of the following issues related to budgeting:

Obsolete budgeting. The budget data is obsolete within weeks after it is published because of ongoing changes in the environment. Customers and competitors usually change their behaviour after the budget is published, and a prudent reaction to these changes often cannot be accommodated in the budget. In addition, today’s budget process takes an extraordinarily long time, sometimes exceeding a year, during which the organisation ...

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