Budgeting
Complex and expensive projects require very detailed budget to ensure success. Critically discuss.
CIMA (2009) says better management accounting can help solve the common problem of mega project disasters. CIMA (2009) also states that many projects that appeared have been driven by mad geniuses and visionaries whose ability to go over budget has tested the sanity of all those involved. The best example is the Sydney Opera House (CIMA, 2009). It was one of the world’s most famous buildings which eventually went one thousand and four hundred percent over budget and sadly broke the career of architect (CIMA, 2009). Nine out of ten of all mega projects around the world go over budget, many by astronomical amounts (CIMA, 2009). The cost overrun has been constant over the seventy year period that we have been able to generate data which says about the profession of cost estimators (CIMA, 2009). Cost, time overrun, benefit, demand and revenue shortfall are the problems of budget does not hit the target for the mega projects (CIMA, 2009).
Budgeting is defined as “the process of allocating an organization’s financial resources to its units, activities and investments” (Blumentritt 2006, p73). Although budgets are often stated in terms of money, they need not be, and can also relate to quantities made and sold, numbers of employees to be recruited, or weights of material to be consumed (ACCA, 2010). The purposes of budget are forecasting, planning, coordination, communication and authorization (ACCA, 2010). To draft a budget, an organization should do forecasting (ACCA, 2010). Forecasts are often based on the results of previous periods which are updated for known changes (ACCA, 2010). The forecast will not always be correct, but at least the organization had to look ahead (ACCA, 2010). Once forecast are completed, planning can be carried out (ACCA, 2010). Detailed planning might even require the forecasting stage to be revisited to check estimates or to try to gather
CIMA (2009) says better management accounting can help solve the common problem of mega project disasters. CIMA (2009) also states that many projects that appeared have been driven by mad geniuses and visionaries whose ability to go over budget has tested the sanity of all those involved. The best example is the Sydney Opera House (CIMA, 2009). It was one of the world’s most famous buildings which eventually went one thousand and four hundred percent over budget and sadly broke the career of architect (CIMA, 2009). Nine out of ten of all mega projects around the world go over budget, many by astronomical amounts (CIMA, 2009). The cost overrun has been constant over the seventy year period that we have been able to generate data which says about the profession of cost estimators (CIMA, 2009). Cost, time overrun, benefit, demand and revenue shortfall are the problems of budget does not hit the target for the mega projects (CIMA, 2009).
Budgeting is defined as “the process of allocating an organization’s financial resources to its units, activities and investments” (Blumentritt 2006, p73). Although budgets are often stated in terms of money, they need not be, and can also relate to quantities made and sold, numbers of employees to be recruited, or weights of material to be consumed (ACCA, 2010). The purposes of budget are forecasting, planning, coordination, communication and authorization (ACCA, 2010). To draft a budget, an organization should do forecasting (ACCA, 2010). Forecasts are often based on the results of previous periods which are updated for known changes (ACCA, 2010). The forecast will not always be correct, but at least the organization had to look ahead (ACCA, 2010). Once forecast are completed, planning can be carried out (ACCA, 2010). Detailed planning might even require the forecasting stage to be revisited to check estimates or to try to gather