Answer to Question #236162 in Management for SHARPY MOONO

Question

It is important for institutions to budget and to further have feedback by receiving regular budgetary control reports in order to facilitate budget centres take control action. The report may or may not be detailed but ideally should contain sufficient information in order to motivate individual managers. Reports to top managers can be exceptional in nature.  

It is also essential for companies to conduct forecasting as they conduct their business.  

Required:  

1. Explain clearly the differences between forecasting and budgeting.     

2. Define the following terms: i. Single-loop feedback.                     

ii. Double-loop Feedback.           

iii. Feed -back loop. Explain this as it applies in the Control Circle.  

(maximum 600 words)

Answer 1

1.

Forecasting is the estimation and approximation of the amount of revenues or income that a firm will obtain in the future. While budgeting is the quantification of the amount of revenues or income that a firm will obtain in the future.

2.

 i. Single-loop feedback.   

 This is a feedback in system that occurs through one electrical path only. In single-loop learning characterized by the fact that we changed our action or behavior to correct or fix or avoid wrong doings.

Single-loop learning describes learning category that takes place when the objective is to correct and fix problems within the present organizational structure so that the system will function better, and does not attempt to alter the structure of the system.

ii. Double-loop Feedback.  

Double-loop learning is composed of the modification of goals, objectives or decision-making rules on the basis of experience. The first loop uses the goals or decision-making rules, the second loop enables their modification, hence "double-loop". The advantage of double loop learning is that it can prevent and correct errors in the future—before they occur.

iii.  Feed -back loop. 

Feedback Loops can enhances or buffer any changes that may occur in a system. Positive feedback loops enhances and amplifies changes; this tends to move a system away from its equilibrium state and make it more unstable. During the first stage, input is created. During the second stage, input is captured and stored. During the third stage, input is analyzed and during the fourth stage, the insight gained from analysis is used to make decisions.