Abstract:
This study explores the existence, role and practice of operations budgeting in
Australia, given repeated industry criticism of budgeting, specifically sourcing from
Europe and North American practitioner groups. If budget criticism is justified,
budgeting should either reduce in practice, exhibit change in the way in which it is
practiced, or continue per normal as there may be other competing organisational
reasons for its existence. Therefore, how are organisations budgeting at present? Are
budgets an outdated management control system, and therefore less relevant for
current business practice?
Clearly, there is a need for greater understanding on what Australian organisations are
doing at present, in relation to budgeting. However, studies broadly examining
budgeting are rare. This study examines budgeting in Australian organisations, based
on a sample of 338 Australian firms. The results indicate that, irrespective of
significant anecdotal practitioner criticism, 98% of Australian organisations continue
to budget. Furthermore, and contrary to many practitioner and academic studies, the
majority of budgeting organisations perceive budgeting to have an overall beneficial
effect, as opposed to being detrimental.
Budgeting also appears to be used more as a planning device, than for evaluation or
determining compensation of staff. This finding questions the relevance of the
majority of budget criticisms to date, as the majority of budget criticisms relate to the
use of budgets as an evaluation device (Hansen and Van der Stede, 2004). Finally, a
surprisingly large proportion of organisations in the sample use rolling forecasting,
and use it to support their traditional fixed period budgeting. Overall, this report
affirms that budgeting is still of great assistance to organisations, though it inevitably
consumes a large part of an organisation’s resources..
