Key Issues with Budgeting

This scenario topic is from Strategic Business Leader:

ATD is a medium – sized engineering company providing specialist components for the marine engineering market .  The sales manager is currently under pressure from the other departmental managers to explain why his solo revenue forecasts are becoming increasingly unreliable, Errors in his forecasts are having consequential effects on production , inventory control , row materials purchasing and, ultimately, on the profitability of the  company itself.  He uses a combination of experience , intuition and guesswork to produce his sales forecast , but even he accepts that his forecasts are increasingly inaccurate .

The recent failure of the company to meet in sole targets for quarters 1 and 2 has prompted the Chief Executive Officer ( CEO ) to put into place a brood cost – cutting policy .  He hos banned business travel , cancelled a number of marketing initiatives and introduced a complete freeze on recruiting for posts which become vacant on the resignation of the current post holder .

He claims that our failure to meet sales targets means we must ruthlessly cut costs .  However, many of the departmental managers are critical of such on indiscriminate approach on and believe that the measures might be counter productive.  This cost cutting hos particularly demotivated the production manager and the inventory manager, who both blame the Soles Director for setting unrealistic targets.  The production manager hos commented that , I am working tirelessly to keep costs down , but the result is that I cannot replace one of my best purchasing administrators who left last month .

In general , departmental managers of the company feel ” powerless and undervalued”. The company currently does not have a formal budgeting process in place .  The production manager is sure that such a process, particularly if senior managers were involved in the budget- setting process, would help address the issues that ATD is facing.

The relevant Professional Skills to apply for this scenario are communication , and commercial acumen to good business decision – making or business savvy.


i.    Identify the key issues with budgeting in the Sales dept at ATD.

ii .  Explain how the poor budget planning process and poor decision – making at ATD causes or results in ineffective strategic cost management and control processes in Sales , Production and other departments .

Complete Answer:

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