FFL wants to improve its overall budgeting practices. Which if any of the following would help it achieve this?

[Select one, two, all, or none of the available statements.]

Question

FFL wants to improve its overall budgeting practices. Which if any of the following would help it achieve this?

[Select one, two, all, or none of the available statements.]

BlackTom AI · Accepted Answer

Question restatement: The scenario asks which actions would help FFL improve its overall budgeting practices. It notes that there may be multiple valid selections and that you can choose one, two, all, or none of the available statements. The two statements provided for consideration are:

Option A: Accept that sometimes it may be better for the organization if actual sales are less than budgeted sales.
Option B: Evaluate its sales manager's performance based on multiple measures - including, for example, the accuracy of his sales forecast.

Analysis of Option A: Allowing for the possibility that actual sales fall short of the budget can promote more realistic budgeting and variance analysis. If budgets are frequently built assuming overly optimistic sales, the organization may miss warning signs or allocate resources inefficiently when actuals are lower. Embracing the idea that underperforming sales relative to budget can happen helps management adjust assumptions, improve the budgeting process, and focus on improving forecasting accuracy and resource allocation. A potential pitfall to watch for is using shortfalls as a blanket excuse; the key is to differentiate between controllable versus uncontrollable factors and to adjust processes rather than merely accepting shortfalls.

Option B: Evaluating the sales manager's performance using multiple measures, including forecast accuracy, supports a more holistic view of budgeting accuracy and accountability. This approach encourages the manager to improve forecasting quality, understand drivers of variance, and align incentives with better planning. Relying on a single metric (e.g., revenue) can incentivize undesirable behavior or misreporting, whereas multiple measures (forecast accuracy, pricing discipline, pipeline health, lead conversion, etc.) provide a fuller picture and can guide targeted improvements in budgeting and sales planning.

Why Option A might be considered partially beneficial: It promotes realism in budgeting and improves variance analysis, but if overemphasized, it could encourage accepting poor performance without remedy. Therefore, it should be balanced with proactive steps to investigate causes of shortfalls and to revise models and assumptions accordingly.

Why Option B generally strengthens budgeting practices: It ties budgeting to forecast quality, encouraging accountability and continuous process improvement. However, it should be implemented with careful selection of measures to avoid excessive gaming of metrics or focus on forecast accuracy at the expense of other strategic considerations.

Putting the two options together: Both ideas address different facets of budgeting improvement. Option A targets the realism and quality of the budget inputs and the understanding of variance, while Option B targets the governance and forecasting discipline that feeds the budget. Using them in combination tends to yield a more robust budgeting process than relying on a single approach.

Note on the absence of explicit answer options: The prompt provides two statements and asks which would help improve budgeting practices. Since both statements offer constructive angles, a combined application of both would typically be viewed as beneficial for strong budgeting practices.

ACCT20001_2025_SM1 Weekly Quiz CM09

FFL wants to improve its overall budgeting practices. Which if any of the following would help it achieve this? [Select one, two, all, or none of the available statements.]

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