On The "5 Points" Defect Of Traditional Budget Management

With the development of society and changes in the internal and external environment of enterprises, the effectiveness of traditional budget management methods is constantly being questioned and criticized by the natural and theoretical circles. Management consulting experts believe that there are some drawbacks in traditional budget management, but budgeting management is the cornerstone of modern enterprise management, and its importance to enterprise management is beyond doubt.

Because the traditional budget is based on "single cost driver", the cost allocation base of the budget formulation is single, which can not well reflect the causal relationship between resource consumption, dynamic business process and cost. It can not correctly analyze the causes of the difference between the actual performance and the budget indicators, and affects the rationality of cost control and performance appraisal.

This makes the budget lose its budget.

It can not serve the realization of enterprise value.

Enterprise strategy is an overall plan for the enterprise to seek long-term survival and continuous development in the face of complex and intensely changing operating environment.

Strategy is the soul of an enterprise and occupies the core position in the whole modern enterprise management.

However, the traditional budget management takes annual profit as the goal, and does not link budgetary management with the strategy of enterprises, forming the disadvantages of emphasizing short-term behavior and ignoring long-term behavior, making short-term budgetary goals not compatible with long-term enterprise development strategies.

(3) traditional budget indicators are not scientific.

Traditional budgeting focuses on financial indicators only, budgets for all business activities, but difficult to budget for some important non-financial indicators such as product quality, production efficiency and customer reputation.

Management consulting experts believe that comprehensive budget management is one of the few management control methods that can integrate all key issues of the organization into a system.

(4) the traditional budget obscures the waste and inefficiency of resource use in the past.

The traditional budget is usually based on the implementation of the budget of the previous year, taking into account the changes in various factors in the budget period, increasing or reducing the budgetary amount of the relevant resources projects to determine the budgets for the future period, so it is easy to continue the resource wastage of last year.

(5) the traditional budget is narrow and incomplete.

The traditional budget law often focuses on the production cost budget, neglecting the budget for R & D, marketing and after-sale services.

Traditional budgetary control is confined to the internal enterprise, and does not include the connection between enterprises, suppliers and customers.