Conforming to Periodic Budgetary Goals

The focus on setting specific budgetary (and standard costing) targets, and monitoring variances from pre-set targets at the individual level emphasises conformity rather than excellence. The routine, periodic nature of the budgeting and reporting cycle, tied into the preparation of the company's annual published financial reports, may also artificially subdivide important activities or processes which should be evaluated and controlled on a different time scale.

Predictive Capability

Control based on feedback about past performance, despite being a necessary accompaniment to the delegation of economic resources which is the economic basis for all capitalist business activity, is of limited value in directing the current operations of the company. To help managers to direct the current operations of a company towards a desirable future accounting information must provide a good basis for forecasting and evaluating the economic consequences of alternative decisions. This requires a 'feedforward' or predictive control capability that captures the important dimensions of decisions that may be contemplated. It is therefore necessary to structure the past information recorded by the accounting system in a way that provides a basis for predicting the likely consequences of alternative future actions.