BUDGETING 223
Despite its abandonment of budgeting, Handelsbanken remains a very success-
ful bank. Wallander concluded:
abandoning budgeting, which was an essential part of the changes, had no
adverse effect on the performance of the bank compared to other banks,
which all installed budgeting systems during the period. (p. 407)Conclusion
In this chapter we have linked budgeting to the strategy process. We described var-
ious approaches to budgeting and the mechanics of the budgeting cycle. Through
a series of examples we explored budgeting for a service, retail and manufacturing
organization. We also introduced cash forecasting and the reconciliation between
profit and cash flow.
The chapter concluded with a snapshot of theoretical perspectives on budgeting
that contrast the rational-economic view of budgets with the subjectivity of
budgets as a consequence of bias and aggregation, and the power that underlies
the budgeting process. We also questioned whether risk is really reflected in the
content of the budget document and whether budgets have any value at all.
The assumptions behind the production of budgets are important for planning
purposes, but crucial when managers are held accountable for achieving budget
targets. This is the process of budgetary control, which is the subject of Chapter 15.
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