Traditional budgeting during financial crisis
##plugins.themes.bootstrap3.article.main##
##plugins.themes.bootstrap3.article.sidebar##
Abstract
This study examines the evolution of budgeting practices in the extremely difficult Spanish economic environment. In order to analyse if companies are still maintaining their budgeting process and if, right now, they are facing more difficulties in forecasting accurate indicators, two similar web surveys were addressed over two periods of time, firstly in 2008 at the beginning of the financial crisis, and secondly in 2013 after five years of a downward trend. In addition, in-depth interviews were conducted to investigate how companies brought more flexibility to their budgeting process in order to cope with environmental uncertainty.
The survey indicates that 97% of respondents are still using a traditional budgeting process being this result similar to the one found in 2008. However, 2013 showed that the reliance on forecasted information is being increasingly questioned. Furthermore the study revealed that the respondents are bringing more flexibility to their processes, being able to modify the objectives once the budget is approved and to obtain new resources outside the budgeting process.
This paper contributes to revealing information about difficulties in setting reliable objectives in a turbulent environment and provides data about the evolution of budgeting practices over five years during an austere economic crisis.
How to Cite
##plugins.themes.bootstrap3.article.details##
Traditional budgeting, planning, uncertainty, management control
Apanaschik, G., 2007. 2007 Budgeting and Forecasting Study. PwC Advisory, Performance improvement, 1-45.
Arwidi, O. and Jönsson, P., 2009. Management control practices in Sweden – discussion and positioning of survey results. EIASM, 5th conference on performance measurement and management control, Niza.
Barret, E. and Fraser, L.B., 1977. Conflicting roles in budgeting for operations. Harvard Business Review, Julio-Agosto, 137-146.
Baudet, R., 1941. Les fonctions du budget. In: N. Berland (2004). Mesurer et piloter la performance. Paris: Editions La Performance, 96-97.
Berland, N., 1999. A quoi sert le contrôle budgétaire? Les rôles du budget. Finance, Contrôle, Stratégie, 2 (3), 5-24.
Berland, N., Levant, Y. and Joannides, V., 2009. Institutionalization and deinstitutionalization of budget. Symmetrical analysis of rhetoric associated to the introduction of budget and Beyond Budgeting. 30ème congrés Association Francaise de Comptabilité (AFC). Strasbourg.
Bouquin, H., 2001. Le contrôle de gestion. 5ème ed. Paris: PUF.
Bunce, P., Fraser, R. and Woodcok, L., 1995. Advanced budgeting: a journey to advanced management system. Management Accounting Research, 6, 253-265.
Courtney, H., 2008. A fresh look at strategy under uncertainty: An interview. The McKinsey Quarterly, December, 1-8.
Covaleski, M.A., Evans, J.H. III, Luft, J.L. and Schields, M.D., 2003. Budgeting research: Three theorical perspectives and criteria for selective integration. Journal of Management Accounting Research, 15, 3-49.
Doche, F., 2012. Observatoire International du Contrôle de Gestion – Résultats 2012. Les cahiers Techniques, DFCG, 7.
Duncan, R., 1972. Characteristics of organizational environments and perceived environmental uncertainty. Administrative Science Quarterly, 17 (3), 313-327.
Ekholm, B. and Wallin, J., 2011. The Impact of Uncertainty and Strategy on the Perceived Usefulness of Fixed and Flexible Budgets. Journal of Business Finance and Accounting, 38 (1) and (2), January-March, 145-164.
Fernández, A. and Rodríguez, E., 2011. Itinerario histórico y situación actual de la disciplina presupuestaria empresarial. De Computis, Revista Española de Historia de la Contabilidad, 14, Junio, 50-78.
Frow, N., Margisson, D. and Odgen, S., 2010. Continuous budgeting: Reconciling flexibility with budgetary control. Accounting, Organizations and Society, 35, 444-461.
Hofstede, G., 1977. Contrôle budgétaire: les règles du jeu. Paris: Editions Hommes et Techniques.
Hope, J. and Fraser, R., 1997. Beyond budgeting… Breaking through the barrier to the third wave. Management Accounting, 75, 11, 20-23.
Hope, J. and Fraser, R., 2000. Beyond budgeting. Strategic Finance, 82 (4), 30-35.
Hope, J. and Fraser, R., 2003. Who needs budgets? Harvard Business Review, 81 (2), 108-115.
Hopwood, A.G., 1974. Leadership climate and the use of accounting data in performance evaluation. The Accounting Review, 49, 485-495.
Horngren, C.T., Sundem, G.L. and Stratton, W.O., 1996. Introduction to Management Accounting, Nueva York: Prentice Hall.
Hunt, S., 2006. Building finance performance management mastery with superior budgeting and forecasting capabilities. Accenture, Finance and Performance Management, 1-11.
International Monetary Fund, 2013. World Economic Outlook Database. Abril 2013. Washington: IMF.
Jensen, M.C., 2001. Corporate budgeting is broken – let’s fix it. Harvard Business Review, 79 (10), 94-101.
Libby, T. and Lindsay, M., 2010. Beyond budgeting or budgeting reconsidered? A survey of North-American budgeting practice. Management Accounting Research, 21, 56-75.
Lorain, M.A., 2010. Should rolling forecasts replace budgets in uncertain environments? In: Epstein, M.J., Manzoni, J-F and Dávila, A., eds. Performance Measurement and Management Control: Innovative Concepts and Practices, vol. 20. Esmerald Books, 177-208.
Lyne, S.R., 1988. The role of budget in medium and large U.K. companies and the relation with budget pressure and participation. Accounting and Business Research, 18 (71), 195-212.
Merchant, K.A., 1998. Modern management control systems – text and cases. New Jersey: Prentice Hall Inc.
Neely, A., Bourne, M. and Heyns, H., 2001. Driving value through strategic planning and budgeting. A Research Report from Cranfield School of Management and Accenture. Accenture, Finance and Performance Management, 1-47.
Otley, D.T., 1977. Behavioural Aspects of Budgeting. Accountant’s digest, 49, 1-32.
Otley, D.T., 2006. Trends in budgetary control and responsibility accounting. In: Bhimani, A., ed. Contemporary Issues in Management Accounting. Oxford: Oxford University Press, 291-307.
Phyrr, P., 1970. Zero based budgeting. Harvard Business Review, 48 (6), 111-121.
Ryan B., Scapens R. and Theobald M., 2004. Metodología de la investigación en Finanzas y Contabilidad. Barcelona: Ediciones Deusto.
Samuelson, L.A., 1986. Discrepancies between the roles of budgeting. Accounting, Organizations and Society, 11 (1), 35-45.
Santesmases Mestres, M., 2009. DYANE Versión 4 – Diseño y análisis de encuestas en investigación social y de mercados. Madrid: Ed. Pirámide.
Simons, R.S., 1995. Levers of Control. Boston: Harvard Business School Press.
Sweeney, J., 2009. The budget (1922-2009). Business Finance, May-June, 12-17.
Van der Stede, W.A., 2000. The relationship between two consequences of budgetary controls, budgetary slack creation and managerial short term orientation. Accounting, Organizations and Society, 25 (6), 609-622.
Authors retain copyright of its works. Management Letters/Cuadernos de Gestión publications are licensed under Creative Commons license CC-BY-NC-ND, granting open access rights to society.
Specifically, CC-BY-NC-ND license permits any kind of use, distribution, publicize and copy the article, as long as the original author and source are properly recognized and for Non Commercial purposes.
The author can use the article freely always indicating that it has been published in Management Letters/Cuadernos de Gestión. Any re-edition of the article must be approved by the journal editorial team.