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An endless debate: the sense and nonsense of budgeting

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Purpose ‐ This article aims to summarize several studies about how businesses currently practice budgeting in Western and Central Europe. While analyzing these studies in the larger context of the ongoing debate about budgeting's importance, it provides conceptual linkages between them and additional insights into their findings. Design/methodology/approach ‐ The reported studies employ survey research, sometimes with panels of self-selected interviewees within a single country and sometimes with samples of SMEs across multiple countries. Findings ‐ Recent survey results continue to show managers complaining about the wastefulness of preparing budgets, while steadfastly believing they are indispensable. Among others, Horv├íth and Partners accordingly advocate "advanced budgeting" concepts to modernize both planning and budgeting processes. CFO-panel participants generally uphold the advocates' position except in the crucial area of available IT-support. However, as explained next, connecting operational and strategic planning is primarily a conceptual rather than a hard- or software problem. In the European automobile suppliers' industry, controlling services therefore generally still rely on a small set of well-understood standard tools. Practical implications ‐ Firms not using these standard tools in their operational controlling risk falling behind the competition. In order to close the gap between the perceived importance of and satisfaction with more complex instruments, however, several tools require improvement or simplification as well as conceptual clarity about how to employ them. Originality/value ‐ This article presents results from diverse studies on budgeting as currently practiced, reform concepts, and obstacles to their implementation. In doing so, it discusses how they relate to one another and what their significance is for both theory and practice.
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Keywords: Balanced scorecard; Budgets; Control systems; Performance management; Shareholder value anaysis

Document Type: Research Article

Publication date: 2008-09-19

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