Beyond budgeting

Abstract

Boots, Nokia, Ericsson, General Electric and Volvo. These are just a few of the growing number of organizations that, for a number of reasons are removing the annual budget. The Consortium for Advanced Manufacturing International (CAM-I) as well as the Chartered Institute of Management Accountants both have programs dedicated to the removal of the annual budget. In the first part of the study the arguments for the removal of the annual budget are examined. These are that as a management tool the annual budget has several deficiencies and that in today's economy the annual budget is a barrier to change. This is followed by a description and discussion of the alternative tools (rolling forecasts, Balanced Scorecard, Key Performance Indicators etc.) that may be used instead of the annual budget. In the second part an empirical study of a few organizations in Malta is performed so as to determine whether the arguments brought forward during the theoretical review apply to Malta. From the results it was concluded that it is not yet advisable for Maltese organizations ' . to remove the annual budget. The introduction of more non-financial management tools is also suggested.