The budgeting process, accounting homework help
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Study
The budgeting process and budgets themselves have
significant impacts on management actions and performance, in both positive and
negative ways. It is common at many local, state, or national governmental
agencies, and nonprofit organizations, and even in some for-profit enterprises
for managers to increase spending at the end of the budget cycle. This process,
usually referred to as “use it or lose it” can be harmful to objectives of
any organization. Managers do this, as they often feel that if they don’t spend
the amount that was budgeted this year, next year their supervisors will reduce
their budget by the amount not spent in the current year. So, to avoid having
their budget dollars reduced, managers often increase spending at the end of
the year to ensure all budgeted amounts are spent even if items are not necessarily
needed. This is more common in government and nonprofit organizations, but can
be found in for-profit enterprises as well.
Requirement: Write a memo to the budget managers in an
organization, assuming you are the CEO. Your memo should direct budget managers
not to utilize this approach, but also offer a logical rationale, and perhaps
an alternative solution.
