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ACCA Strategic Professional · Advanced Performance Management · Budgetary planning and control

Zentara Ltd's finance director imposes departmental budgets with no consultation. Managers say the targets are unrealistic and show little commitment to achieving them. Which budgeting approach would most directly address the lack of ownership?

Participative budgeting is the best fit. Letting managers help set their own targets increases ownership, acceptance and motivation, whereas imposed budgets with tighter reporting or finance-only preparation leave the commitment problem unresolved.

  1. AImposed budgeting with tighter variance reporting
  2. BParticipative budgeting in which managers help set their own targetsCorrect
  3. CCentralised incremental budgeting based on last year's figures
  4. DRolling forecasts prepared only by the finance team

Explanation

Participation gives managers a say in targets, which raises ownership, motivation and acceptance of the budget. Tighter reporting under an imposed budget would increase pressure but not commitment. Incremental and finance-only rolling approaches do not involve managers in setting targets.

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