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NEWS - PLANNING
SMEs find budgeting to be useful: survey
9/13/2006
Despite frequent criticism about their usefulness, operating budgets are regarded as useful for planning according to new research released by CPA Australia. A survey of 335 Australian small to medium enterprises (SMEs) found 98 per cent of respondents use budgeting, with most regarding it as beneficial.
The survey also revealed that organisations generally spend almost half an annual period preparing a budget for a future fixed period, but that this process is helped significantly by information technology.
The results from a 2005 survey of 335 Australian small to medium enterprises (SMEs) titled Budgetary Practices of Australian Companies have been released, and suggest that operating budgets are regarded useful for planning and that boards of directors see them as a useful monitoring tool.
The study found that budgeting remains a highly popular management accounting tool in Australia, used by approximately 98 per cent of respondents organisations, most of which regard it as beneficial or, at least, of neutral effect. It revealed that organisations generally spend almost half an annual period preparing a budget for a future fixed period, but that this process is helped significantly by information technology (IT).
The authors suggested that the continued popularity of budgeting most likely lies in its usefulness for planning. Rolling forecasting seems to be regarded as a supplement to fixed period budgets and is used to improve the relevance of an organisation's fixed period budgeting, or budgeting generally.
Other key findings of the report were that:
• 97 per cent of organisations use the traditional annual fixed budget
• 66 per cent of respondents use a rolling forecast to support their annual fixed budget
• one-third of respondents are not satisfied with their budgeting activities
• the benefits of budgeting are greater where it is used for planning and control
• Australian organisations primarily use internal sources for budget information, rather than outside sources such as industry bodies and professional associations
• the benefits of IT are greater for rolling forecasters than fixed period budget users
The research was conducted by Prabhu Sivabalan, Zoltan Matolcsy, David Brown and Professor Teemu Malmi, from the University of Technology Sydney on behalf of CPA Australia.
Reproduced from the CPA Australia - 12 Sep 2006
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