Managerial ACCT Mastercard's Budgeting Process Uses Term Paper

Pages: 2 (560 words)  ·  Bibliography Sources: ≈ 2  ·  File: .docx  ·  Level: College Senior  ·  Topic: Economics

¶ … Managerial ACCT

Mastercard's budgeting process uses a balance between incremental budgeting and flex budgeting. The company begins with the previous year's budget and has base assumptions about the change and size of the directions based on the company's history. However, the company recognizes that there is a high degree of correlation between the state of the economy and its business. Therefore, Mastercard adjusts its budget according to the outlook for key variables such as interest rates, consumer spending and savings rates. That allows the Mastercard budget to accurately reflect the expectations for the economy in general in addition to expectations for internal changes and in-house improvements.

These steps reflect both strategic planning and budgeting. The other two components of the budgeting process are measurement and evaluation (De With & Dijkman, 2008). These two components are essential to control. Budgeting is only one aspect of control at Mastercard -- the company relies on a wide number of metrics and measures for its activities, not all of which are incorporated into the budget. This occurs down to the employee level, with standards of achievement set.

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As noted, strategic decision making and the budget are somewhat related. The budget is the result of careful analysis of both internal and external factors. Strategic management focuses on internal moves that relate to both internal and external factors. However, there is a temporal difference in that strategic planning typically occurs before the budget is developed. The budget must, after all, incorporate the company's strategic plans into its figures.

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Budgeting is also a form of control in the Strategic management process. Thus, the degree of variance in the actual performance from the budgeted performance becomes… [END OF PREVIEW] . . . READ MORE

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