| For the sake of simplifying this article, strategy and | | | | must be taken into account in drawing the budget. |
| planning will be used to mean the same thing. Budgets | | | | Principal budget factor that limits an organisation's |
| and objectives are related and so is the | | | | performance. It is usually sales demand. If an |
| implementation of business strategy. The | | | | organisation cannot make and sell, more of its |
| implementation of a business strategy is considered | | | | products because consumers do not accept that |
| as the final stage in business strategy (before | | | | price it restricts the company's demand. Management |
| monitoring and control). It could be defined as the | | | | may, not know the limiting factor, say, machine |
| translation of strategy into organisational action | | | | capacity, distribution and selling resources, until a |
| through organisational structure and design, resources | | | | budget, draft has been prepared. This is the starting |
| planning and the management of strategic change.'' | | | | point in budget preparation. Once this factor is |
| Analyzing the definition, it becomes obvious that | | | | determined, the rest of the budget is set to be |
| strategy implementation of a business strategy would | | | | drawn. |
| therefore, be how well the various components in | | | | Sales budget preparation: Usually this is the base or |
| carrying it out are successfully integrated. | | | | primary budget prepared based on sales forecasts |
| The organisational structure and design aspect of the | | | | and from which most of the other budgets emanate |
| definition has to do with how the human resources in | | | | because it has been established that the principal |
| the organization are utilised, mobilised and organised | | | | budget factor for most organisation.This leads to |
| to be encountered through the usage of the | | | | initial preparation of budgets for the following: finished |
| organisation; and design aspect is that most | | | | good stock, production, resources for production, |
| employers can leave the firm if they are not | | | | overhead cost, raw materials (stock), raw materials |
| motivated or given the right position to operate in | | | | (purchase) |
| the organisation in other words underutilised. | | | | It is when all the budgets are in complete |
| The next aspect in the implementation of a business | | | | consonance and with one another that they are |
| strategy - resources planning-sets out what | | | | summarised into the master budget made up of |
| resources need to be created and which disposed of. | | | | budgeted profit and loss account, budgeted Balance |
| It deals with the identification of resources needed, | | | | sheet and cash budget. |
| how those resources will be deployed and controlled | | | | Cash budget is one of the most important planning |
| to create the competences needed to implement the | | | | tools that any organisation can use. Its usefulness is |
| strategies successfully. This resources configuration is | | | | felt when it shows that there are insufficient cash |
| dependent on protecting unique resources i.e. where | | | | resource to finance planned operations. Cash budget |
| a strategy depends on the uniqueness of a particular | | | | can show four positions or scenarios giving |
| resources such as legal means, fitting resources | | | | management an indication of potential problems that |
| together (i.e. mix resources to create competence) | | | | might arise so that management can avoid such |
| business process re-engineering (i.e. to create a | | | | problems. |
| dynamic improvement in performance) and exploiting | | | | The implication of the position is one of the areas |
| experience by learning and improving continuously to | | | | where the budget interacts with the implementation |
| improve competence. One of the many problems is | | | | of the business strategy. For example when the cash |
| the conflict arising amongst departments on the | | | | budget shows a position of short-term surplus, |
| allocation of funds especially where money is involved | | | | management are prompted to either make |
| in the implementation of the business strategy. | | | | short-term investments, pay creditors early to obtain |
| Management of strategic change is the next | | | | discount or increase sales by increasing debtors and |
| component in the implementation stage. This change | | | | stocks, on short term deficit, the appropriate action |
| involves incremental change that merely builds on | | | | to be taken by management include increase |
| skills, routines and beliefs of the organization so that | | | | creditors, reduce debtors and arrange overdrafts to |
| change is efficient, and transformational change, | | | | fund the deficit. The other cash position-long term |
| which requires the organisation to change its | | | | surplus is tackled by making long-term investments, |
| paradigm over time. | | | | expand organically or by acquisitions or diversify |
| In constructing a strategic management system, the | | | | among others; and long-term deficit could be handled |
| budgeting process must be linked with the business | | | | by raising long-term finance or disinvestment |
| strategy. In commencing the budgeting process | | | | opportunities. |
| therefore, budget targets and organizational goals are | | | | Budgets and objectives (strategies) are clearly |
| set up for the next budgeting period by the budget | | | | allocated to those areas and activities in the |
| directors, whose main task is to produce a master | | | | organization, which are seen as priorities. If important |
| budget that combines business units and functional | | | | objects are to be achieved, and priority strategies |
| period budgets. From period budgets, the budget | | | | implemented, resources must be provided. |
| director constructs the master budget. This is then | | | | However, research in inter-organisational settings |
| adjusted to calculate the forecasted shareholder | | | | identifies resource acquisition (i.e. budget), |
| value, which in turn acts as a test on the corporate | | | | cooperative interaction acquisition and organisational |
| strategy. This is the point where strategic analysis | | | | power acquisition as the difficult part of |
| can be verified. If the strategic blueprints do not | | | | implementation processes. Thus, inter-organisational |
| create shareholder value, they are taken through | | | | fights for larger budgets also influence budget |
| strategy modification cycle. Once the master budget | | | | planning and affect strategy implementation. For |
| and therefore, the strategic blue prints are through, | | | | example, where resources are limited and finite, |
| the budget is set to be used and strategy to be | | | | strategic opportunities may be constrained. Since |
| implemented. | | | | budget planning is usually annual, budgets are |
| Acquiring a sufficient budget is one of the main | | | | frequently bound to be different from the current |
| requirements for efficient business strategy | | | | situational needs, especially towards the latter part of |
| implementation. The question is where does budget | | | | the budget period. Because of this, flexed budgets |
| and business strategy implementation interact? | | | | are designed to allow for changes in the level of |
| There is evidence of numerous spates of failures of | | | | activity, which might result from adaptive changes in |
| business strategies implementations and plans in spite | | | | functional and competitive strategies. |
| of reasonable analyses. Someone has said that good | | | | It must also be noted here that while the role for |
| planning can greatly reduce the risks in business | | | | today's financial managers is quickly moving upstream |
| failure. | | | | in the strategic plane, the challenge becomes even |
| A plan is a projection of future activity. It is normally | | | | grater in light of the accelerating pace of change. This |
| translated into budget if quantified. Thus, for a | | | | reality is rendering obsolete the traditional approaches |
| forthcoming time period in which the budget relates | | | | to corporate governance, such as 3-5 years static |
| expressed in money terms. It is defined as a financial | | | | annual planning and static budgets. To provide useful |
| or quantitative statement, prepared prior to a | | | | financial insight, sooner rather than later managers |
| specified accounting period, containing the plans and | | | | need to think about business strategy as a process |
| policies to be pursued during that period. | | | | of continuous course correcting more like a series of |
| Generally, budgets are prepared procedurally and | | | | real options than a single projected cash flow |
| systematically usually followed by most organisations | | | | statement. |
| (although the procedures might differ depending on | | | | The implementation of a business strategy could be |
| the size, type and leadership style of the | | | | likened to a human body without a soul (budget). If |
| organisations) are as follows: | | | | there is no soul in a body, it is deemed dead; in the |
| Communication of details: Those responsible for | | | | same vein budget is that soul (especially when |
| preparing the budget must be made aware and kept | | | | implementing a new business strategy) for the |
| informed of the company's strategic plans (plans or | | | | implementation of a business strategy; thus, the two |
| objectives) so that the budget is tailored accordingly. | | | | are linked and interdependent. |
| This means that long-term plans of the organisation | | | | |