Answer To: HOLMES INSTITUTE FACULTY OF HIGHER EDUCATION Assessment Details and Submission Guidelines Trimester...
Akash answered on Jun 02 2021
HI5017
MANAGERIAL ACCOUNTING
NAME AND STUDENT NUMBER: ____________________________
Abstract
Budgeting is the basic requirement of any business sin the modern times. This assignment deals with the critical evaluation of an article relating to the use of budgeting process in hospitals. Detailed evaluation of the process followed by various organisation and the approach of managers towards the same has been done. Budgeting plays an integral part in the management of operations of any entity and managers are required to use the same with due care and proficiency. The issues with the process have been discussed in detail along with suitable recommendation for the same.
Table of Contents
Abstract 2
Introduction 4
1. Budgeting Process 4
2. Discussion regarding budgeting satisfying the purpose of planning, controlling and evaluating performance 5
3. Top Down and Bottom up Budgeting 6
4. Evaluation of the Stated Comment 6
5. Recommendations 7
Conclusion 8
References 9
Introduction
In the modern time, the complexities of operations have increased thereby leading to requirements of more resources. In the world of scarce resource as compared to large number of uses of the same, optimum utilisation of resources is the need of the hour. Budgeting helps in planning the use of the limited resource for achievement of the objectives of the organisation. Execution of the plans is a major issue for the managers due to the dynamic external as well as internal environment. This focus of this report is on the use of the budgeting technique for effective resource management. The article chosen fir thus purpose is “Evaluating priority setting success in healthcare: a pilot study” by Shannon L Sibbald, Jennifer L Gibson, Peter A singer, Ross Upshur and Douglas K Maertin. Critical analysis of the article has been done to evaluate the relevance and challenges of budgeting systems.
1. Budgeting Process
In simple words, budgeting is the process of spending the money in a planned manner. Planned spending helps an organisation in planning for the resources and tracks the difference in actual spending. According to Barasa et al. (2017), budgets act as a guideline for use of resources or spending money. Budgeting process enables a manager to plan his spending in advances and thereby arrange the necessary funds at the right point of time. It ensures that funds are available at the most important times and following a spending plan helps the managers in savings of interest cost.
There are various type of budgets such as sales budget, financial budget, production budget, cash budget, overheads budget and others. As noted by Than et al. (2017), various budgets are used to meet the purpose of different departments and managers across various departments used budgeting as a tool to improve the allocation of resources. Cash budget is one of the most widely used budget among the manager (Berenson et al. 2016). It is mainly used for planning the cash requirements of an organisation for a later period. It ensures that there is ample availability of cash as and when required. The planning of cash requirement sis done in advance, which reduces the chances of cash shortage and ensures that there is no idle cash left.
There are multiple advantages of budgets however, authors argue that budgeting consumes a large portion of time of the managers and therefore, they do not get time for managing the core operations. In addition to that, budgets often restrict the firm from being adaptable and flexible in this dynamic environment. As the environment is highly dynamic, the decisions to be taken also require change from time to time (Asumta, Ismiyanti & Hartiningsih, 2016). However, budgets are not altered, which leads to rigidity of the overall process. As mentioned in the journal, budget also impedes adaptability due to defined boundaries. In the modern file, prices and margin are under constant pressure and therefore, managers are required to be flexible and adaptable. As the requirements of the budget are set in advance, the results may not change as they become out of date.
In the chosen article, it was observed that earlier it was the responsibility of the senior management to prepare the budget and there was no involvement of programme managers and directors in the same. However, in the budgeting process of 20007-2008, the programme managers and directors were involved in the budgeting process. The programme managers have a real experience of the requirements of the resources at the operational level. In 2007-08, almost 90% of the managers were involved in the budgeting process of the organisation. There were requests to consider the internal collaboration on budgets to capture significant cross-departmental interdependencies. The budgeting process had to follow a strict timeline, which indicates that organisations try to be disciplined in their budgeting process. Overall, the results matter, but the approach towards the same also matter. If the approach is good, there are higher chances of a better execution in the long-term, thereby leading to long-term success. The overall budgeting process was not implemented properly as the managers did not have ample knowledge and budgeting skills. However, after 2007-08, the situation has improved and the managers of the hospital have gained knowledge and skills (Sibbald et al. 2010).
According to Sibbald et al. (2010), accountability is a major issue in budgeting process and the same was observed in the chosen article. It was observed that the managers did not have a clear idea regarding the individual/team involve behind the decision-making process. Even the personnel responsible for taking the budgetary decisions had no idea the decision maker. Thus, it can be observed that there was a clear gap in the accountability of the budgeting process as no one was about to shoulder the responsibility and be accountable for the same.
2. Discussion regarding budgeting satisfying the purpose of planning, controlling and evaluating performance
Planning is of prime importance for the success of any strategy and effective planning is not the only requirement for achievement of organisational objectives. Effective planning couple with effective execution of the same plays a detrimental role in driving the organisation towards the zenith of success. From the chosen article, it can be observed that health care organisation do focus on planning but the approach is not highly exhaustive. However, recently there has been a shift in the mind-set of the managers and there was a significant shift in the organisation culture of the hospitals. The managers started to be accountable and took the responsibility of starting the multi-year planning approach (Sibbald et al. 2010).
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