Academic journal article Management Accounting Quarterly

Budgeting: Perspectives from the Real World: A Survey of Senior Accounting and Finance Managers Examines the Budgeting Process at For-Profit Companies, Including the Usefulness and Perceived Value of the Process, Users' Satisfaction with It, and the Impediments and Challenges to Budgeting

Academic journal article Management Accounting Quarterly

Budgeting: Perspectives from the Real World: A Survey of Senior Accounting and Finance Managers Examines the Budgeting Process at For-Profit Companies, Including the Usefulness and Perceived Value of the Process, Users' Satisfaction with It, and the Impediments and Challenges to Budgeting

Article excerpt

The value of the budgeting process has been the subject of intense debate over the past few years. In their 2003 book, Beyond Budgeting, Jeremy Hope and Robin Fraser suggest that the traditional budgeting process is outdated and dysfunctional and, therefore, should be abandoned. (1) Alternatively, a 2007 survey by Theresa Libby and R. Murray Lindsay offers evidence that senior accounting and finance managers find the budgeting process to be more helpful than harmful overall and that there is a perception that operating managers could not function well without budgets. (2)

The Libby and Lindsay study provides answers to some important, but general, questions regarding the budgeting process, including whether accounting and finance managers' organizations planned to abandon budgeting and whether respondents agreed with some of the major criticisms of the budgeting process.

We conducted a follow-up survey to the Libby and Lindsay study with the goal of providing answers to some more-detailed questions:

* How are budgets in modern (for-profit) organizations prepared? That is, what are the descriptive characteristics of the budgeting process as used today?

* Does budgeting add value for organizations? If so, how?

* How satisfied are finance and accounting managers regarding the role that budgets play within an organization?

* What are the primary behavioral consequences, both positive and negative, of using budgets?

* What is the relationship, if any, between budgets and other management processes--i.e., are they integrated in any meaningful sense?

THE SURVEY

In November 2007, questionnaires were sent via e-mail to 29,501 members of the Institute of Management Accountants (IMA[R]) who, based on job title, were likely involved in the budgeting process. These members included general management, corporate management, public accounting, general accounting, cost accounting, and environmental accounting staff members. Participants were asked to respond to questions based on their position in the organization (i.e., "company-level" or "segment-level," where "segment" was defined variously as a subsidiary, division, department, or product line).

A total of 815 members completed the survey. Because the focus of our study was for-profit entities, as with the Libby and Lindsay study, we excluded responses from managers at nonprofit or governmental entities. This resulted in a final sample of 720 respondents who worked at publicly traded corporations (52.5%), privately held corporations (42.4%), and partnerships (5.1%), mostly in the United States.

Approximately 48% of respondents work at the corporate level, with the remainder at the segment level. The highest percentage of respondents was in manufacuturing (28.1%), followed by healthcare (9.9%). In regards to company size, the largest percentage of respondents (35.7%) reported company revenues between $1 billion and $50 billion and segment revenues between $50 million and $500 million (34%). The largest group responding to our survey was controllers (25.5%). On average, our respondents had 13 years of budgeting experience.

Descriptive Characteristics of the Budgeting Process

The initial part of the survey instrument asked for descriptive information regarding the budgeting process at the respondent's organization. Specifically, we wanted to know how budgets were developed and how they were used for planning and control purposes.

According to 69.2% of respondents, the development of the budget is accomplished via a negotiated process (a combination of "top down" and "bottom up"). Further, 85% of respondents stated that this process was the same throughout the entire company, with exceptions due to merger/acquisition activity or international operations. These results are roughly consistent across the two groups of respondents, corporate and segment. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.