Financial Accounting Budget for Operational And Behavioural Benefits

Question: Describe several operational and behavioural benefits that are generally attributed to a participative budgetary process. Identify at least four deficiencies in Jack Rileys participative policy for planning and performance evaluation purposes. For each deficiency identified, recommend how it can be corrected. Answer: Describe several operational and behavioural benefits that are generally attributed to a participative budgetary process. Budgetary process refers to the system with which the government creates and approves budget. Budgeting is the means to allocate funds and limit of expenditure for a particular department. It set a limit and allocates particular amount for working and development of a particular department or sector. It is a very important tool which helps the organisations and also the government to have a check on funds utilised. A budget if properly prepared helps to provide operational and productive efficiencies in all divisions of an organisation (Horngren, 2013). There are both behavioural and operational benefits of budgeting process. The behavioural benefits of budgetary process involves that it ensures that all the important issues in connection with an expense are included. This process also helps to ensure that the employees understand the importance of their roles in meeting the organisations goal and they put in more effort to fulfil their responsibilities. The budgetary process provides the organisation with an opportunity to solve problems which are most of the time not noticed by anyone (Drury, 2011). The employees are also motivated to fulfil their goals with the help of budgetary process; it gives them an initiative and a goal with the motivation to achieve it. The most important benefit of budgetary process is that it makes the people at all levels in an organisation feel that their opinion is important to the top management in their decision making. The operational benefit of the budgetary process is that it helps to improve the effectiveness of the spending by creating better investment opportunities for the organisation. With the flow of time, the management gets used to budget and actual figures, which helps them create budget which are very accurate. The budget process strengthens the overall financial planning of an organisation (Drury, 2011). Therefore we see that budgetary process not effects the finance department but it also helps the organisation to improve its operational effectiveness. The budgetary process helps the organisation improve all its functions by cutting expenses and investing more wherever required (Williams, 2011). The whole process of budgeting helps to provide control over ones money and focus on money goals by involving participation of all the levels of an organisation. Identify at least four deficiencies in Jack Rileys participative policy for planning and performance evaluation purposes. For each deficiency identified, recommend how it can be corrected. In the above problem we see that Jack Riley believes that participation from all the divisions would motivate its managers and help to improve productivity. Though his contentions are correct, still there lie a few deficiencies in Jacks planning. The first deficiency which can be easily noticed is that the appropriation Target for each division seems to be arbitrarily determined. In order to overcome this deficiency, Mr, Riley can use appropriate methodology in order to determine appropriation target for all the divisions. Allocation made to the divisions should be made on basis of their performance, input/output or future possibilities of expansion (Graham Smart, 2012). Therefore, the appropriation target is required to be more properly defined. Secondly, we see that there is lack of quantitative analysis for performance evaluations and financing. For example, sales can be taken as the basis of performance evaluation. The division with the most proper quantitative performance evaluation should be rewarded. Therefore, the organisation should develop a quantitative measure to evaluate fiscal performance and evaluations, and use them for allocation and distribution of rewards for the division with best performance (Albrecht et. al, 2011). Thirdly, in Mr. Rileys approach we see that it lacks the point that fiscal responsibility could be encouraged as a method of performance evaluation procedure. In order to make fiscal responsibility a tool for performance evaluation procedure, the share of financial savings should be distributed with the mangers that are more fiscally responsible (Albrecht et. al, 2011). This can be done with the help of bonus programmes. Lastly, we can say that the division managers may be arbitrarily determining their department budgets. The mangers should be recommended to use the minimum level approach which is most suitable to their respective divisions. Preparation of individual budget is as important as the total budget. Any miscalculations in individual budget will affect the overall financial plan of the organisation (Graham Smart, 2012). Therefore above are the few deficiencies and recommendations for the same for Jack Rileys approach for budgetary process. If they are effectively implied then it may be advantageous to the whole division of social services for the state. References Albrecht, W., Stice, E. and Stice, J. (2011). Financial accounting. Mason, OH: Thomson/South-Western. Drury, C. (2011).Cost and management accounting. Andover, Hampshire, UK: South-Western Cengage Learning. Graham, J. and Smart, S. (2012) Introduction to corporate finance. Australia: South-Western Cengage Learning. Horngren, C. (2013)Financial accounting. Frenchs Forest, N.S.W: Pearson Australia Group. Williams, J. (2012).Financial accounting. New York: McGraw-Hill/Irwin.