Describe the similarities and difference between a classical budgetary process and a rolling forecast process. Who are the key players in each and what is his or her role? What are the advantages and disadvantages of each
APA format, more than 400 words, 3 Recent scholars as reference, intro body and conclusion
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Introduction:
Budgetary processes and forecasting processes are among the most common tools used in financial planning and management. While both methods aim at creating a financial plan, they differ in terms of scope, flexibility, and timing. Understanding the similarities and differences between the classical budgetary process and rolling forecast process is essential for medical college students to develop competent financial management skills. This essay will discuss the similarities and differences between the two processes, the key players, and their roles, and their respective strengths and weaknesses.
Classical Budgetary Process vs. Rolling Forecast Process:
The classical budgetary process is a fixed, annual plan that involves estimating income, expenses, and capital expenditure on an annual basis. It usually has a one-year horizon and offers a rigid guide for project management. The key players in this process are the top-level managers in the organization, who are responsible for setting annual budgets, assessing revenue streams, and allocating resources. The budget is then passed to lower-level managers who are tasked with executing it. While the approach is valuable since it offers a comprehensive view of the organization’s financial plan, the rigidity of the process makes it challenging to cope with unexpected changes.
On the other hand, a rolling forecast process is a more flexible, adaptable financial planning technique that allows organizations to revise their forecasts on a rolling basis. The rolling forecast process is updated regularly and creates new data sets, adding a new quarter or year to the original forecast while removing the oldest from the end of the period. The process is less rigid and allows a company to adjust its financial plan to match current market conditions. The key players in this process include middle-level managers who are responsible for analyzing the market and adjusting the financial plan accordingly, and top-level managers who review the forecasts and make executive decisions based on the revised financial figures. The strengths of this approach include greater flexibility, faster setup, and easier adaption to new market conditions. However, the weakness of this approach is the lack of a definitive guide to the overall financial plan.
Conclusion:
In conclusion, both classical budgetary process and rolling forecast process are valuable financial management tools, and each has its strengths and weaknesses. The classical budgetary process provides a static, fixed guide of what is expected to happen over a given period while the rolling forecast process is more flexible and adaptable, enabling organizations to adjust dynamically to market changes. The key players in each process play different roles, ranging from analyzing and adjusting financial strategies to executing them. Therefore, students in medical college need to be familiar with both processes to develop comprehensive financial management skills.
