Trends in Budgetary Control and Responsibility Accounting

Trends in budgetary control and responsibility accounting

David Otley

Summary

Budgeting control and responsibility accounting have been around for many years and still in a wide use in most businesses. However, it has been recognized that other non-financial measures are also important to evaluate an organizational performance. Such measures were created and adopted by many companies. Now the question is whether the budget control processes will be improved or replaced with a variety of alternative techniques. The US-based activity-based budgeting (ABB) group has taken the approach how to improve the current budgeting system and has listed several potential benefits of their approach; while the European-based beyond budgeting (BB) group has taken a more radical approach to replace the current system with other performance management systems (such as: Balance scorecard (BSC) of non-financial performance measures; activity-based management (ABM) systems; benchmarking techniques; customer relationship management models; and so on).

Budget control systems are still "form the backbone of the management control systems of many organizations", even though sometimes employees are evaluated based on short-term performance (ignoring long-term benefits).

While both approaches have their advantages and disadvantages, they both need to continue to be studied and supplement each other as parts of wider systems of organizational control.