The Role Of Budgeting In Financial Planning: Two Studies Examined

Overview of Budgeting as a Systematic Process

Budgeting is termed as a systematic process planning through which an individual or an organization can manage their spending by making optimum use of available resources. In the context of the present era, the budgeting process plays an important role in handling different expenditures of the company with reference to income generation capabilities (Rubin, 2016). A budget is termed as an important tool through which a systematic assessment of revenue and expenses is carried out for a certain period of time.

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A budget is compiled as per distinct requirement, and it can be re-evaluated on a periodic basis to meet different kinds of individual and organizational objectives. Different types of Budgets are developed for different goals such as a person, a family, a formal group of individuals, an organization and others. For private companies and government organizations, a budgeting system is termed as a most important internal tool which is used by public authorities and management of different (Bogsnes, 2016) This system plays an important role in the development of different kind’s reports as per the requirement of different kind’s internal and external stakeholders for different objectives. Apart from that budget system provides significant assistance to managers for handling several tasks related to the business information system or cost controlling process. This report carries out detail investigation of different factors of budgeting with reference to two studies.

Anessi-Pessina., Eugenio., Barbera., Carmela., Sicilia., Mariafrancesca.,  Steccolini and Ileana., 2017. Public sector budgeting: a European review of accounting and public management journals. Accounting, Auditing & Accountability Journal. Bradford Vol. 29, Iss. 3,  (2016): 491-519. DOI:10.1108/AAAJ-11-2013-1532

Budgeting is considered as a great tool for handling tasks related to financial reporting. In this regards, the present investigation has focused on examining the role of budgeting in different kinds of public agencies (Anessi-Pessina. and et al., 2017). This investigation provides detail understanding about budgeting in the context of public sector organization in the form of municipal agencies and other government controlled organization. The purpose of the current study is explained below:

  • To examine the changing institutional as well as socio-economic landscape for development of budgets in public sector units.
  • To carry out a detailed review of different elements of public budgeting with reference to current budgeting theories and practices for handling various tasks related to public administration, public expenditure management and other accounting

With reference to the above objectives, several theories and accounting practices associated with budgeting are evaluated so as government agencies can manage different activities and resources through optimum resource planning (Wildavsky, 2017). In this context, the study of Kelly and Rivenbark (2014) has determined that budgeting in public services is also similar to private companies in which public authorities make efforts in assessment of needs of a general citizen in the form of infrastructure, health and social care, safety and security and other services. Therefore, it is identified that public sector budgeting is also required detail assessment of needs of people, costing of the different long-term and short projects, the effectiveness of a wide range of budgeting tools and approaches, the requirement of funds etc. This detailed study has found very effective in optimum allocation of different resources for the attainment of long term and short term goals of the public sector as per the predetermined plans. Gonçalves (2014) has determined different approaches related to managerial controlling in different types of the organization both public and private sector for developing an appropriate budget. The author further has found that application of computer system with a combination of different accounting practices has improved appropriateness budget outcomes.

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Different Types of Budgets for Different Goals

Ter Bogt, Van Helden and Van Der Kolk (2015) evaluated the role of management information system in public management in order to carry out appropriate resource planning and determined that the success of budgeting system is highly associated with efficiency of information which have been gained before the development of budget and after implementation. By considering a wide range of data, the public management system is able to improve the efficiency of the budget, and the optimum result could be generated in the form of high-quality public services within fewer expenditures, saving of public money, timely completion of projects etc. All these elements are associated with an appropriate resources planning and management system.  

Investigation 2

Brown, Jason. L., Fisher, Joseph. G., Peffer., Sean. A, Sprinkle.  and Geoffrey. B., 2017. The Effect of Budget Framing and Budget-Setting Process on Managerial Reporting.  Journal of Management Accounting Research. Sarasota Vol. 29, Iss. 1

Budget development is very lengthy and critical process because it requires the involvement of several individuals in the development of an optimum budget. This investigation determines the level of involvement of employees and management for the development of an appropriate budget to meet the objectives of the organization (Brown et. Al., 2017). In this context, the purposes of the present research are mentioned below:

  • To determine different aspects of participative budgeting in information collection for preparation of budgets for several objectives.
  • To examine different budget frames such as honest, fair as well as preferred in different business conditions.

On the basis of the above objective, this research has determined that appropriate of the budget is highly associated with the quality of data which have been acquired from different resources within the organization. In this process, participative budgeting has found very effective for superiors in order to elicit private information from several subordinates and employees within an organization (Brown et al., 2017). This approach increases effectiveness business decisions based on a certain budget. The study of Singh, Ghosh, Sharma, Patra, Dadhwal and Mishra (2016)has examined that management should have to consider several other elements such as the interest of subordinates, the expectation of management and goals of organizations for developing an appropriate budget report.

 Further investigation has found that success of budgeting system greatly depends on the mutual understanding of people belongs from top, middle and lower level of management so as optimum budget frames could be created for different business objectives such as promotion of products, development of new products and services, development of new training and skills advancement terminologies, assessment of new sources of funds with reference to their cost, selection of long term and short term business expansion projects and etc. Therefore, appropriate involvement of people belongs from different departments, and management structure is required for ensuring the success of the budgeted plan (Baiocchi and Ganuza, 2014). This is because if top authorities develop a resource plan without considering views and suggestion of employees of the lower level, then management could address resistance of employees for application of new system within a business system. On the contrary, if a lower level of staff develops a budget without assessing the approval of top managers, then the overall rejection of the budget could be addressed. Therefore, determination of the degree of involvement is identified as a most critical aspect of budget development practices because it has a direct impact on the data collection along with its evaluation process. In addition to that, a budget with improper data is not able to meet the expectations of top management and subordinates.

The Importance of Budgeting in Handling Expenditures

The research of Rubin (2016) has determined that participatory budgeting is identified as a most effective tool for resource planning and scheduling because this system ensures involvement of each individual within an organization. This approach also provides assurance to senior level of management about efficiency of workers and other subordinates because all these individuals make efforts with highest level of skills and efficiency for managing various tasks related to cost control, sales enhancement and improvement in operational efficiency so as overall budget outcome could be attained as per the forecasted manner (Bogsnes, 2016).

Budgeting within an organization plays an important role in the identification needs of resources along with their allocation for different business objective and management operations. It is a very broach element of resource forecasting. Therefore, two studies have been examined in the present report for evaluating various aspects of budgeting in different types of firms. In this regards, there are some similarities addressed in the findings of both studies. In the context of the present investigation, both researchers have determined that the success of the budgeting system is highly associated with an appropriate information assessment system (Anessi-Pessina. and et al., 2017). Therefore, optimum allocation of resources for different business objective along with public management system through which an optimum information collection system so as an optimum budgeting system can be created for identification different kinds of resources and their allocation of different activates. In addition to that, both studies have focused on generating best outcomes by handling different individuals to meet requirements of budget goals. In addition to that, some similar findings are also addressed in terms of a systematic collection of information along with its distribution for different activities in the creation of an appropriate resource allocation plan.

Apart from some similar findings, there are several differences identified in the outcomes of both studies. In this context, the first study has generated outcomes in order to evaluate the effectiveness of a verity of management accounting systems such as budgeting for public management, government agencies and other activities related to public welfare projects (Wildavsky, 2017). Furthermore, the finding of the first investigation is mainly characterized by the needs of resource planning in public welfare like allocation of funds for different infrastructure projects, health and safety, social welfare and etc. Apart from that first study has focused to evaluate the importance of budgeting practices within public sector organizations and its different projects.

Overview of Two Studies on Budgeting

On the other hand, the findings of the second investigation are mainly focused on better utilization of resources by enhancing the involvement of subordinates along with the management in the development of the budget. In addition to that outcome of the second investigation are mainly focused for participative budgeting in which research has found that appropriate contribution of subordinates in budgeting process required for assessing reliable data from different sources (Gonçalves, 2014). Apart from that, the second research has mainly focused to avoid situations of budget rejections because if top authorities did not consider the views of subordinates while making a budget then an organization could assess refusal of the lower level of staff for managing different activities for resource allocation. In a similar way, if subordinates did not consider the suggestions of senior level of managers, then the success of budgeting plan cannot be ensured.

Investigation 1

The success of an organization either private or public sector is highly correlated with strategy development approach. In this process, public sector companies or government agencies consider wide range accounting tools and tactics for managing different resources such as men, machine, material and other financial resources as per the distinct requirement and objectives (Baiocchi and Ganuza, 2014). Therefore, this investigation has found very effective in order to gain extensive learning of budgeting system in the context of public services and its effectiveness to meet different objectives. Therefore, learning of the first investigation is mentioned below:

  • Firstly, the first investigation has determined that budgeting is acted a marginal role in handling several tasks related to public services. In this, public authority can ensure about timely completion of different projects for public welfare. Therefore, it can be stated that resource planning is a very critical element in the success of the budgeting process.
  • Secondly, this report also determines the intra-organizational aspects of budgeting which emphasize its managerial and allocative functions so as different objectives of a government organization could be attained with the help of a systematic budget.  
  • Thirdly, the present investigation has carried out a detail evaluation of qualitative and quantitative aspects budgeting process and has acquired extensive understanding about public resources allocation process (Gonçalves, 2014). It determines that public budgeting lies at the intersections and communication between different disciplines and professions through which appropriate results could be generated by applying distinct management accounting approaches such as cost control, determination of machine hours etc.
  • The last learning of the present investigation is that budgeting procedures in the public sector offer significant opportunities for future research. This report has addressed the importance of budgeting with reference to modern accounting practices in the context of public administration and management perspectives. According to this, the management in public organization has to consider data collection as a primary element of the success of budget through which optimum level of outcomes could be produced for ensuring safety and security of people in the form health and social care as well as advancement in infrastructure facilities as per the predetermined resource allocation plan.  

Investigation 2

The second study of budgeting system is mainly focused for determining the level of involvement of staff member and managers of several departments within a private organization. According to detail investigation different aspects of budgeting system, the second investigation evaluates that participative budgeting is identified as an important system in which budget is designed and developed after assessing the input from different subordinate managers rather than budget is being imposed (Wildavsky, 2017). The primary objective of participation in the budget setting is to subtract different kinds of responses to other subordinate managers. This approach has found very effective in order to set a form of personal ownership over the final budget so as optimum results can be generated in the context of the present business environment. In the participative budgeting approach, management makes efforts in order to increase subordinate participation in budget setting. In this process, subordinates offer its own information so as supervisors are able to formulate the self-imposed budget or participative budget. In addition to that organization, performance can be improved by managing the optimum allocation of the resources in a more efficient manner (Anessi-Pessina. and et al., 2017). According to the information facilitated by the subordinate, an optimum resource-allocation decision is playing an important role in participative budgeting that will improve the organization performance. In this regards, learning of the present investigation is mentioned below:

  • Firstly, the second investigation has determined participative budgeting includes the transmission of information from subordinate to the upper level of management that which provide significant benefits in terms of increased job satisfaction for the subordinate.
  • Secondly, this kind of budget system has found very effective for increasing communication among different level of management or business structure because subordinates have great opportunities in order to establish direct contact with superior and subordinates can discuss a wide range of organizational issues to their reporting superior (Wildavsky, 2017).
  • Thirdly, development of budgets with consideration of view of employees at different level ensures optimum flow of information which is particularly more important when the high difficult task is being required a greater the need for subordinate’s consultation.
  • The fourth learning of present research is that participative budgeting has some negative aspects that lead to a negative impact on the overall budgeting process. In this context, too much participation in budgetary negotiation leads to vacillation and delay (Ter Bogt, Van Helden and Van Der Kolk, 2015). Therefore, If negotiation does not reach towards an appropriate agreement than the overall performance of organization will be hampered because business entity is not able to develop an appropriate budget so as an appropriate resource allocation cannot be processed with an appropriate manner. In a similar way, the attitudes of the negotiators create a negative impact on the budget outcome.


On the basis above investigation, this report has concluded that an appropriate budgeting system is mainly depending on the effectiveness of the information acquisition process. This report has examined the outcomes of two studies and concluded that the effectiveness of public sector budgeting is associated with appropriateness data like  needs of people, costing and time duration of the different long-term and short projects, the effectiveness of budgeting control system and approaches, the requirement of funds etc. Further investigation has found that optimum allocation of different resources for the attainment of long term and short term goals of the public sector is performed through a systematic budget. In addition to that, the assessment of the second study has concluded that employee participation can be considered by management in budgeting process when subordinates have appropriate skills and ability to manage different elements of resource allocation planning otherwise overall performance of budget could be hampered as a result of improper planning.


Anessi-Pessina., Eugenio., Barbera., Carmela., Sicilia., Mariafrancesca.,  Steccolini and Ileana., 2017. Public sector budgeting: a European review of accounting and public management journals. Accounting, Auditing & Accountability Journal. Bradford Vol. 29, Iss. 3,  (2016): 491-519. DOI:10.1108/AAAJ-11-2013-1532

Baiocchi, G. and Ganuza, E., 2014. Participatory budgeting as if emancipation mattered. Politics & Society, 42(1), pp.29-50.

Bogsnes, B., 2016. Implementing beyond budgeting: Unlocking the performance potential. John Wiley & Sons.

Brown, Jason. L., Fisher, Joseph. G., Peffer., Sean. A, Sprinkle.  and Geoffrey. B., 2017. The Effect of Budget Framing and Budget-Setting Process on Managerial Reporting.  Journal of Management Accounting Research. Sarasota Vol. 29, Iss. 1

Gonçalves, S., 2014. The effects of participatory budgeting on municipal expenditures and infant mortality in Brazil. World Development, 53, pp.94-110.

Kelly, J.M. and Rivenbark, W.C., 2014. Performance budgeting for state and local government. Routledge.

Rubin, I.S., 2016. The politics of public budgeting: Getting and spending, borrowing and balancing. CQ Press.

Singh, R.J., Ghosh, B.N., Sharma, N.K., Patra, S., Dadhwal, K.S. and Mishra, P.K., 2016. Energy budgeting and emergy synthesis of rainfed maize–wheat rotation system with different soil amendment applications. Ecological indicators, 61, pp.753-765.

Ter Bogt, H.J., Van Helden, G.J. and Van Der Kolk, B., 2015. Challenging the NPM Ideas About Performance Management: Selectivity and Differentiation in Outcome?Oriented Performance Budgeting. Financial Accountability & Management, 31(3), pp.287-315.

Wildavsky, A., 2017. Budgeting and governing. Routledge.