• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Report on Budgetary Control System

Extracts from this document...

Introduction

TRESCOTHICK LIMITED From: 050201820 FAO: Managing Director RE: Budgetary Control System Monday 11th December 2006 Report on Budgetary Control System Introduction The aim of this report is to identify and assess problems with the budgetary control system that is currently in operation within Trescothick Ltd, and to determine any effects that the system is having within individual departments and on the company as a whole. A further aim of the report is to provide recommendations to you as to how the system could be improved and what possible effects these improvements could have within Trescothick Ltd. The structure of this report is indicated by the inclusion of sections and sub-sections and relevant sections will be linked together. There shall be a conclusion at the end of the report which is intended to reiterate what the report has determined. My recommendations as to what the company should do to improve the budgetary control system that is currently in place within Trescothick Ltd are situated towards the end of the report. They include manager participation and a change in the performance evaluation style, with an emphasis placed on long-term objectives of the organization. Problems with the Current Budgetary Control System Compromises Product Quality The current system involves 'tightening' a department's budget slightly every time a previous budget is met. According to the assembly department manager, this is having an effect on the quality of products. ...read more.

Middle

Therefore, managers, as seen with the assembly manager in this case will compromise other responsibilities in order to meet the budget because their individual performance is measured in this way. In terms of Trescothick Ltd, both the assembly manager and the maintenance manager are guilty of this. The above two sections can both be linked in here. Product quality is being overlooked in the assembly department and important maintenance work is being overlooked in the maintenance department. Things will only get worse from here. The managers in both departments are meddling with their responsibilities in order to meet the budget. Thus, if one department struggles to reach their budget for a certain month and the manager decides to manipulate quality or production, etc in order to succeed in meeting the budget, then the following month's budget will be even more difficult to reach because of the 'tightening' system that is currently employed. To succeed in maintaining the budget, manipulation will take place again meaning that the quality of the product, maintenance of machinery and even employee morale and motivation will decline even further. Hostility towards the budget may soon appear. When using this method of budgeting, as Hopwood (1976) stated, budget data are used in a rigid manner in performance evaluation. Hopwood's research in this field is in agreement with Argyris' research that was conducted in 1952. Argyris (1952) found that supervisions in his study perceived budgets as sources of pressure and tension. ...read more.

Conclusion

The preparation of the budget should be a 'bottom up' process. This means that the budget should originate at the lowest levels of management and be refined and coordinated at higher levels. The justification for this approach is that it enables managers to participate in the preparation of their budgets and increases the probability that they will accept the budget and strive to achieve the budget target. The current performance evaluation report is based upon a high RAPM. Research has shown that, in this situation, budget participation is likely to lead to higher subsequent performance. The recommended performance evaluation style will still involve a degree of RAPM, although not to the extent of the current system. However, participation is an excellent method to help the budgetary control system be a success, therefore it should be implemented when preparing future budgets. 'Tightening' Method When the company decides to 'tighten' the budget, it may be worth taking into account certain considerations for example environmental aspects, and costs that are out of management control before issuing a sterner budget for the forthcoming month. Conclusion Thus, the company needs to study the current budgetary control system and take note of the serious problems it is causing not only in departments, but throughout the whole of the organization in terms of product quality, decisions on workload and general morale and motivation amongst staff within the company. Corrective action needs to be taken to improve the current system and my recommendations of changing the performance evaluation style and the participation of managers when preparing the budget should be thoroughly considered. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level ICT in Business section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level ICT in Business essays

  1. For my business report I am investigating the Co-op erative society supermarket.

    nation and international and is also know as multination chart or structure. Advantages * They can specialize in the separate points, the organization e.g. different products, different geographical areas, different function e.g. sales, production, finance, marking. * Concentration on business area also helps the organization its directors and managers to oversee the businesses success easily.

  2. Business Aims and Objectives.

    Companies and large businesses such as Tesco are legally obliged to publish detailed accounts. The most important parts of these accounts are the balance sheet, which states both what a business owns and its debt. Also the profit and loss account, which records the profit or loss the business, made over a one year period.

  1. My aim is to research and produce a formal business report on my the ...

    This benefits the employees as they will gain satisfaction from knowing they are working for a reputable establishment. * Right the first time and every time This is the fundamental principle of quality control, it lays emphasis on getting it right the first time this reduces the amount of time

  2. Business report on Marks and Spencer.

    Many businesses pursue growth as their main objective. Business people argue that the firm must grow in order to survive; failure to grow might result in a loss of competitiveness. In the U.K. retail Marks and Spencer have 303 stores at the end of March 2001. This also includes three outlet stores, which opened during the year.

  1. Business Report on Manchester Airport PLC.

    Manchester Airport will try and help their customers in anyway, they do this buy: � Providing information desk � Providing retail and food outlets � Customer care cards � Baggage handling � Staff to help them around 4.32 Combining the Functions It is essential the functional areas of an organisation are combined effectively if the organisation meets it targets.

  2. The purpose of this document is to define the Context of Cain Motors Information ...

    decides to go ahead and accept the risk (perhaps the counter measures are too expensive) 9.1. Risks File Risk Form Risk ID: 1 Business Area: Project Raised By: Mrs D Frisby Project Name: Cain Motors Date Raised: 08/02/03 Project Manager: Steve Shirley (dick head)

  1. Budgeting and management planning and control.

    a suitable options to choose the concerned authorities or managers must make sure information relating to each option to observe whether the chosen option interlinked with the purpose of the business and to evaluate whether the resources to pursue the options are available.

  2. In this report I intend to create a detailed report of Tesco's.

    Tesco's is gradually becoming bigger and bigger they are already selling in over 6 European countries and around 6 different countries in Asia, they are trying to increase these to make Tesco a even bigger multi national corporation. As well as expanding into other countries Tesco is also expanding into new ranges such as clothes furniture finance and mobile phones.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work