Executive summary

Australia and New Zealand bank.

Management accounting in many organizations plays a very crucial role in the running of these firms by the management. Majority of the companies from across all the sectors that make up the Australian economy do practice management accounting. Many industries such as the Banking sector of Australia plays a very important function in the Australian management accounting. In addition to the traditional financial accounting, these banks do offer, they also practice managerial accounting especially budgeting. All the activities that this bank gets involved in, they need to be planned and budgeted for so that they can be carried in the most effective and efficient manner which allows them to be performed without delay. The Australian financial or the banking sector is considered to be stable due to the effective use of the management accounting mainly the budgeting. In this report I will dwell mainly on one of the best firms that are listed by the Australian Stock Exchange (ASX). This bank is the (ANZ) Australia and New Zealand bank.

New Zealand bank is among the largest commercial banks in Australia. According to the Australian Stock Sex (ASX) to the economic survey in the financial sector, the operating environment is remains bullish and opportunistic. Despite the tight regulations from the Australian Stock Exchange which have made it challenging to enter into the banking sector especially to the new entrants, there remains an intense competition among the top banks.

Majority of the companies are practicing management accounting especially budgeting as it will facilitate maximization of the shareholders’ value hence protection of their interest.  Budgeting in management accounting plays a very important role in terms of value-added services which includes the management of the data analysis. The success of the most the companies relies on the investment that is done on building a strong reputation both locally and internationally for its consumables and services. Through commitment and endurance, the management has been able to continuously cement its technological leadership as well as customer support across the boundaries in provision of best banking solutions. ANZ despite being considered to be the global champion in real-time in management solutions such as budgeting. This makes ANZ to be recognized as the real leader in budgeting thus making them to be nominated and winning the top industry prize for budgeting innovation as well as program excellence over the years it has operated. According to the economic survey that was conducted by the market regulator, the operating environment of the budgeting technology  in management remains bullish as well as opportunistic due to the fact that technology remains the most dynamic sector due to the continuous innovations making the world a real global village. With the invention and introduction of the Artificial Intelligence (AI) and Internet of Things (IoT) they are set to revolutionize every aspect of doing things in day to day engagements.

The report also has looked at the various types of budgeting such as; sales budgeting, purchase budget, master budget, production plan budgeting as well planning that is needed in each type of budgeting. Understanding of these components will enable the management of the firm to make decisions that are both customer tailored as well as to shareholders who main reason is to maximize their wealth in the business entity.  The detailed look at every item that makes up the budgeting process will be of great use and impact to the management, the government, the members of the public, the potential investors as well the shareholders who are the bigger use of these detailed analysis thus enhancing the usefulness of these budgeting statements from the ANZ Company.

A budgeting refers to a quantitative presentation of a proposal that contains actions that helps in coordinating and implementing the action plan. Budget maybe drawn for an entire organization or for a sub unit. Budgeting will include sales, manufacture, delivery as well as the financial aspect in the company.  Plans of Budget are intended to perform a number of functions that comprises, planning, performance, evaluating, and coordination of the activities based on the implementation plans, communication and motivation of the authority.  According to Charles, T.  Horngren, Budgeting is defined as a quantitative manifestation of an action plan that assists in coordinating and controlling the operations of the firm. Also, it can be used to refer to as a written plan that is used for the future. The managers together with the management of the firm, make use of the budgets so as to plan ahead the operations of the company and this do assist the management to anticipate any challenge before occurrence.  It is said that any business organization that carry out business activities without any kind of financial goals usually find it difficult and same time challenging in making proper decisions that will make the company to alter the way it operates. Business firms that operates with goals that are specific in the form of a budget is in a better control position since this one will help the firm to take control of the its cost by setting clear instruction on how to spend the money since they know that all the costs will be related with the amount that was budgeted.  If costs surpass the cost that was budgeted, and description of the variance will be required to be given.  A budget that is exceeded regularly usually tend to be helpful as it motivates the employee thus helping in setting of the budget.  Any form of a budget that is complete, it is referred by the management of the firm as the master budget. It is referred to as the master budget since it comprises of many budgets that are functional. In most cases, these budgets consists of;

1. Sales budget
2. Production budget
3. Purchase budget
4. Expense budget
5. Equipment purchase budget
6. Cash budget.

Once all these budgets are said to be complete, then the master budget for the whole company firm is prepared, (Flesher and Tonyak, 1960:406). Budget can also be used as a tool for planning as well as control. This is so because, it is evidently related to the wider system that is used in planning as well as a control in the company.  At any given time, planning will encompass the requirement of basis of the objectives that gives it direction in terms of it operation standings. This will involve;

1. Setting of the objectives
2. Making specification of the goals
3. Formulating   the strategies
4. Expressing the budgets.  

A budget can also be said to be a comprehensive and a coordinated plan as well, (Khan and Jain, 1993:296).30

According to, (Richard, 1994: 142), the model of an inclusive budget covers areas such as;

1. Its use in the planning
2. Organizing and monitoring all the company’s both financial and also its operating events in the approaching period.

Budgeting do give a summary of the estimated results for the future contract for the whole company in as much as in the same way as the process of accounting records and gives a summary of the results of the transactions that have been completed.

This means that system of management accounting is documented as one of the most important sources of official information in an any organizational set up since it plays a very vivacious role in assisting the managers of both complex as well as hierarchical establishments by offering the statistics that will facilitate the management in planning, organizing, and also controlling the business organization.

The main determination of this learning is to boost knowledge of the researcher on the development of the management accounting especially budgeting as well as the changing responsibilities of the management accountants. The study aims at defining the management accounting system, pronounce the shortcoming of the outdated system of management accounting, describe the tactical management accounting, as well as identify the changing responsibility of the management accountants. Therefore, this study report will cover the evolution of the management accounting and same time look at the changing responsibility of the management accountants that is in corresponding with the strategic management accounting developments.

Characteristics of a Good Budget

A good budget possesses a number of features. These features enables the budget to serve the business organization so as to ensure the targets and also the business objectives are meet with a counterchecking tool to control and monitor.

These features of a good Budgeting are;

1. Budgets can be articulated for the entire firm or for the sub units.
2. It should have a good and efficient system of accounting that will be essential in making the budget useful to both the firm and the users.
3. A budget possesses the quantitative communication detailing an action plan and also helping in coordination and implementation of business objectives.
4. Budgets are also designed in a way that they do have a number of functions, planning activities, evaluating activities, plans of implementation, plans of communicating, or motivating as well as the actions of authorization, (Pandey, 1994: 21-22). 

Budgetary Control

Budgetary control refers to a system that is used in controlling cost. This includes preparation of the budgets that are used in departmental coordinating as well as establishing responsibilities, in addition to making comparison between the actual performances against the budgeted results so as to attain the maximum profitability (Sharma and Gupta, 1982: 782). That is, it involves;

1. Preparation of the budgets.
2. Recording of the actual figures
3. Comparing the budgeted figures against the actual figures with the aim of revising the performances that is exhibited by the different cost centers.
4. Taking a remedial action in case the actual performance is a lesser amount compared to the budgeted standards. The relevant action is taken instantly.
5. The business is allocated into several accountability centers in which budgets are prepared

Limitations of Budgeting

Both Profit planning as well as the control are significant tools used in management. Though, each of these two tool experiences nearly limits but their use are more productive within the limits encountered.

One of these main shortcomings of budgeting are; (Ojha & Gautam, 2008:8)

1. Since budgeting is not as precise as science. Then it origin will depend on the accuracy of the estimates.
2. The setting up of a system that is flawless for budgeting is not attainable within a short duration of time. This means that budgeting is a continuous exercise that is dynamic process and not static
3. Budgeting can be ineffective and same time expensive, that is, it is unnecessary comprehensive and complex. Budgeting should instead be flexible and inelastic in it use by the management.
4. A budgeting system should be a success and not failure since the efficiency of the management depend on this budget.
5. Budgeting is considered as a management tool.  This means that it does not substitute the management at any time.
6. It tends to be costly to install budgeting system, and this means that some small business may not afford it installation.

Types of budget in banks

Material Purchase Budget

This is a budget that is prepared by the purchase department. Though not much purchases are made in the banking sector, this budget type cannot be overlooked since the banks do buy some supplies for the smooth running of the business such as purchase of office stationery, motor vehicles, consumables as well as the sundry. Material budget takes into account includes planning as well as controlling of the finished products. 

Labor Budget

Both planning and controlling of the labor cost encompass crucial and intricate areas such as;

1. The needs of the human resource
2. Recruitment
3. Training,
4. Evaluation of the job and its specifications
5. Evaluation of the performance.
6. Union of negotiation
7. Administration of both the wage and salary.

Therefore, an inclusive profit planning as well as control program that should incorporate the appropriate techniques.

Cash Budget

Cash Budget will show both the cash outflow and inflow.  Both the opportunity cost and time value for money are secured to the cash flowing within and without the business and not to the origin of the cash (Khan & Jain, 1993:175).  The biggest tests is determination of the cash flows that are only relevant to decision making. These significant cash flows in many instances are the future cash flows that are expected and differ among the alternatives.

Conclusion

Budgeting in any form business organization plays a very important role in its running. It is used a tool of control as well as planning. For business to achieve their objectives and utilize the resources efficiently they must use budgeting in their companies. This follows that in banking sector, budgeting control is a must use tool.

References.

Dangol, R.M. & Prajapati, K. (2000). Accounting for Financial Analysis and Planning. Kathmandu: Taleju Prakashan.

Fago, G. (2003). Profit Planning & Control. Kathmandu: Buddha Academic Publishers & Distributors.

Gautam, C.M. & Ojha, K. (2008). Profit Planning & Control. Kathmandu: Asmita Publishers & Distributors.

Paudel (2003), has conducted research on “Sales Budgeting and Its Effectiveness of Manufacturing Public Enterprises”. The study is to analyzed the present sales planning system of RDL.