The current budget system of the company is accounted for poor decisions of the managers. Namely, a significant amount of money is being spent on activities, services, and products that are unnecessary for the company or even contradict its policy. This report aims to provide a general analysis of the budget consumption for the past several months and suggest a solution for this problem. The paper contains a brief discussion of the issue, a summary of the reviewed findings, and a list of recommendations for the company.
The unreasonable management of the company resources can be observed in the last decisions of the managers. The reason for this misuse of money is the “use it or lose it” system of budgeting the organization. Specifically, a policy of reducing the number of funds any time when they are not entirely spent drives managers to inconsistent decisions. The top management is not expected to evaluate or guide their employees on how to use the money. As a result, the managers do not have a strategy for distributing sources given to them. Additionally, the assigned budget is not calculated by the organization’s current needs but instead depends on expense rates.
To conclude, the issues present in the company that interrupt its proper performance are as follows:
- cutting the budget if it is not spent affects decisions onto its distribution negatively;
- top management does not assess the decisions on expenses systematically;
- the managers do not have a clear strategy for spending the budget;
- the budget is delivered regardless of preliminary analysis of the company’s necessities.
With the notion of problems discussed above, the recommendations for the company are suggested:
- to reserve budget for future needs rather than reducing it if unused;
- to organize top management involvement in other workers decisions about the budget;
- to request a strategy for each budget period from managers;
- to align each period budget with the current strategy.