Discuss the role of strategic planning in the budgeting process. How does it differ from short- term planning? What are the advantages and disadvantages of the participatory approach to budgeting? Solution Strategic Planning in the budgeting process: Strategic Planning is conerned with planning long term action plans to attain the company\'s objectives by considering the changes in horizon. Strategic Planning used for planning for the period medium term viz., 3 - 5 years and for the period longterm viz., more than 5 years. How Strategic Planning differ from short term planning: Strategic Planning dealt with long-term action as per difnition and short term planning dealt with short term action plans for example; 1 to 3 years. Partcipatory approach to Budgeting: Participative budgeting is known as \"bottom - up budgeting\". It contrasts with imposed or top-down budgets where the ultimate budget holder does not have the oppourtunity to participating in the budgeting process. Advantages participatory approach to budgeting: Improved Quality of forcasts to use as the basis for budget: Manager who are doing a job on a day to day basis are likely to have a better idea of what is achievable, what is likely to happen in the forthcoming period, local trading conditions etc., Improved Motivation: Budget holder are most likely to want to work to achieve a budget that they have been involved in setting themselves, rather than one that has been imposed on them from above. Better results: Being the executor of the budget the applicant can control costs better than any other manager. Disdvantages participatory approach to budgeting: Decision making slows down: Participative budgeting stands for increased participation and when there are many people involved in budgeting, the process definitely slows down. Inputs and feedback starts pouring from each side. It takes It takes time to verify the accuracy of measurements which means that budgeting making will be slowed down. Security Issue: The security issue in participative beudgeting also arises from the fact that since early stages too many people are known to lots of facts and information. This information may transform into critical information in the later stages. There is thus a greater apprehension of information being leaked out..

1. Discuss the role of strategic planning in the budgeting process. How does it differ from short-
term planning?
What are the advantages and disadvantages of the participatory approach to budgeting?
Solution
Strategic Planning in the budgeting process:
Strategic Planning is conerned with planning long term action plans to attain the company's
objectives by considering the changes in horizon. Strategic Planning used for planning for the
period medium term viz., 3 - 5 years and for the period longterm viz., more than 5 years.
How Strategic Planning differ from short term planning:
Strategic Planning dealt with long-term action as per difnition and short term planning dealt with
short term action plans for example; 1 to 3 years.
Partcipatory approach to Budgeting: Participative budgeting is known as "bottom - up
budgeting". It contrasts with imposed or top-down budgets where the ultimate budget holder
does not have the oppourtunity to participating in the budgeting process.
Advantages participatory approach to budgeting:
Improved Quality of forcasts to use as the basis for budget: Manager who are doing a job on a
day to day basis are likely to have a better idea of what is achievable, what is likely to happen in
the forthcoming period, local trading conditions etc.,
Improved Motivation: Budget holder are most likely to want to work to achieve a budget that
they have been involved in setting themselves, rather than one that has been imposed on them
from above.
Better results: Being the executor of the budget the applicant can control costs better than any
other manager.
Disdvantages participatory approach to budgeting:
Decision making slows down: Participative budgeting stands for increased participation and
when there are many people involved in budgeting, the process definitely slows down. Inputs
and feedback starts pouring from each side. It takes It takes time to verify the accuracy of
measurements which means that budgeting making will be slowed down.
Security Issue: The security issue in participative beudgeting also arises from the fact that since
early stages too many people are known to lots of facts and information. This information may
transform into critical information in the later stages. There is thus a greater apprehension of
information being leaked out.