lOMoARcPSD|6536636
CPA Australia - SMA - M3 Summary
Strategic Management Accounting (Macquarie University)
,
, lOMoARcPSD|6536636
Module 3:Planning, budgeting and forecasting
Part A: Introduction to plans, budgets and forecasts
Organisations always make decision about sustainability,
which need them decide their market, products or
services and how to allocate resources. When evaluating
alternatives, they also have to consider likely financial
and non-financial effects.
Decisions about actions to pursue and future direction are
set in strategic plan, which normally cover 3+ years
(most 5+). A budget is a means to operationalise
strategic plans, create value and shape organizational
future.
Once strategic plan is ready, organisations focus on
short-term decisions that shape daily activities. These are
in operational plan (normally 1 year). Although budgets
are about achieving goals for next one year only, they are
set in strategic plan, and therefore linked with achieving
long-term goals.
As future is unknown, financial results are predicted.
Forecasts in strategic plan are in general, but are in detail
in operational plan. So, a budget is an outcome of
planning process.
Relationship between budgets and strategic planning
Strategic planning: long-term; senior managers plan and
set future direction to meet org9s goals; divided into
long-term and short-term objectives. Strategy means
1
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future direction, helps organisations know current and
future position and how to get there.
Operational planning: short-term planning and address
short-term objectives of strategic plan.
Table 3.1 differences between strategic and operational
planning
Strategic Operational
planning planning
Time period Long term, 5yr+ Short term, 1yr
Emphasis Set long term Achieve short
goals; strategy to term goals
achieve them and
plans to
implement.
Details presented Broad Very detail
Budgets assist strategic planning and are most useful
when connected with org9s strategy, from where budgets
begin. They set benchmarks for short term goals, which
can tell if an org is meeting its operational and strategic
plan. If used properly, they can signal managers to revise
plans or org strategy, so budgets are control mechanism
to evaluate manager9s and org9s performance.
Figure 3.2: Relationship between budgets and strategy
Strategic plan (long term)
2
CPA Australia - SMA - M3 Summary
Strategic Management Accounting (Macquarie University)
,
, lOMoARcPSD|6536636
Module 3:Planning, budgeting and forecasting
Part A: Introduction to plans, budgets and forecasts
Organisations always make decision about sustainability,
which need them decide their market, products or
services and how to allocate resources. When evaluating
alternatives, they also have to consider likely financial
and non-financial effects.
Decisions about actions to pursue and future direction are
set in strategic plan, which normally cover 3+ years
(most 5+). A budget is a means to operationalise
strategic plans, create value and shape organizational
future.
Once strategic plan is ready, organisations focus on
short-term decisions that shape daily activities. These are
in operational plan (normally 1 year). Although budgets
are about achieving goals for next one year only, they are
set in strategic plan, and therefore linked with achieving
long-term goals.
As future is unknown, financial results are predicted.
Forecasts in strategic plan are in general, but are in detail
in operational plan. So, a budget is an outcome of
planning process.
Relationship between budgets and strategic planning
Strategic planning: long-term; senior managers plan and
set future direction to meet org9s goals; divided into
long-term and short-term objectives. Strategy means
1
, lOMoARcPSD|6536636
future direction, helps organisations know current and
future position and how to get there.
Operational planning: short-term planning and address
short-term objectives of strategic plan.
Table 3.1 differences between strategic and operational
planning
Strategic Operational
planning planning
Time period Long term, 5yr+ Short term, 1yr
Emphasis Set long term Achieve short
goals; strategy to term goals
achieve them and
plans to
implement.
Details presented Broad Very detail
Budgets assist strategic planning and are most useful
when connected with org9s strategy, from where budgets
begin. They set benchmarks for short term goals, which
can tell if an org is meeting its operational and strategic
plan. If used properly, they can signal managers to revise
plans or org strategy, so budgets are control mechanism
to evaluate manager9s and org9s performance.
Figure 3.2: Relationship between budgets and strategy
Strategic plan (long term)
2
