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Business Like Image
So you want to start a home based business. Just think, you can work in your slippers when you want to - what could be better? No commute, not having to play office politics, no income - Whoops how did that sneak in? Let's have a reality check...
Could a Roth IRA be Better Than a 401(k)?
Very few people whom I know are familiar with the benefits of the Roth IRA. It was named for the late Senator William Roth of Rhode Island, who proposed it. It is similar to a traditional IRA except contributions are never tax-deductible....
Professional Relationship Blueprints
Excerpt From The Relationship Handbook: How to Understand and Improve Every Relationship in Your Life by Kevin B. Burk
Our professional relationships draw on two sets of relationship blueprints. The Authority Blueprint governs our...
Self Publishing At The Speed Of Thought
Publishing, both electronic and hard copy, from articles to books, has come a long way in recent years. I used to be fascinated by anyone who had become a "real" author of a book. For that matter, anyone who had been published in a magazine or...
When the Levee Breaks, a selfish look at the financial effects of Katrina and how many more fuel increases we can take
The aftermath of Katrina has affected more that just New Orleans and the surrounding gulf coast. There are huge financial implications associated with the catastrophe, from the initial humanitarian aid to the rebuilding and repairing needed to get...
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Beyond Budgeting: A New Approach to Annual Budgets
In their book, Beyond Budgeting, Jeremy Hope and Robin Fraser
highlight the inadequacy of traditional annual based budgeting
and argue passionately for a new management model that can cope
with the volatility of today's business environment. Their model
embraces much more than just budgeting, it is more a philosophy
of decentralization and a way of encouraging managers at all
levels to become accountable for their performance without tying
them to an annual budget straitjacket.
Hope and Fraser analysed many companies of various types that
have abandoned traditional annual budgeting in favour of their
new model and found that management gained a new sense of
empowerment and a "can do" attitude. In addition, they benefited
from faster and more adaptive decision-making, reduced
bureaucracy and lower costs. The companies became more
competitive and customer satisfaction improved along with many
of the company's' KPI's (Key Performance Indicators).
The new model replaces annual budgeting and centralized control
systems with multilevel controls that include effective
governance, fast financial actuals, trend analysis, rolling
forecasts, key performance indicators, performance ranking, and
management by exception.
Its probably no surprise that annual budgeting is expensive and
time consuming, but just how much time companies are spending on
the process and how useful are the results, should be of concern
to all senior executives. Hope and Fraser found that the budget
process typically starts at least four months prior to the year
to which it relates and grinds its way through countless
meetings where managers negotiate targets and resources. An
estimate of 20 to 30 percent of senior executives' and financial
managers' time is absorbed in the process, while the Ford Motor
Company concluded that they spend $1.2 billion per year on
forecasting and budgeting.
Quite apart from the cost, the
budgets this process produces are
often meaningless. The forecast numbers are out of date before
the budgeting round has finished. Even the numbers themselves
are suspect. Having been agreed upon during countless
negotiations, they are based more on politics than strategy. A
manager's performance is often related to achieving targets set
out in the annual budget, which inevitably leads to a conflict
of interest. Managers will attempt to negotiate the lowest
possible targets and avoid taking risks.
Without going into the whole management philosophy, which is
covered in commendable detail in their book, the control systems
clearly needed in today's volatile world must be fast and
flexible to be relevant. In the companies that successfully
implemented their model, Hope and Fraser say: "All our case
examples use rolling forecasts in one form or another to provide
a fast, high-level view of future performance".
Our budgeting software product, Budget
Controller was design to do just that. We believe it's the
ideal tool to help managers move from the cumbersome traditional
budgeting process to one of fast rolling forecasts based on
business modelling techniques that can help mangers to
continually adapt their strategy in an unpredictable world.
For more information on budgeting and to purchase Jeremy Hope's
and Robin Fraser's excellent book, Beyond Budgeting, visit www.markitquest.com.
About the author:
Mark Ritsema is the founder of Markitquest, developers of the the
Controller Series; a set of Excel based financial modelling
software tools for business. Mark has over 20 years experience
in financial management, having worked in various industries as
Controller and Financial Director for companies both large and
small.
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