Reference no: EM13340972

You have been asked to advise two entirely different businesses about the benefits and problems associated with what is termed the "traditional approach to budgeting and budgetary control". One of the businesses operates in a very stable and static market place, where there is little change in either products or demand year on year, whereas the other business operates in a very dynamic, rapidly changing, innovative environment. If your findings suggest that the traditional approach is inappropriate for one or both of the businesses, please suggest and discuss some alternative approaches.

The "traditional approach" typically involves the following processes:

a) Development of assumptions and plans about the factors influencing next year's budget in advance of the budget year starting;

b) Approval of the budget before the commencement of the budget year;

c) Once the budget year has started, there are monthly comparison reports which compares budget and actual performance on both a monthly and cumulative basis;

d) Action being taken (where necessary) to correct large variances or differences.