Rajvir, an owner of a quickly growing three-year-old small-sized manufacturing business employing 43 staff, storms into her offsite accountant's office.
Rajvir: That's it! I've had it with this budgeting process. Before the start of each year we spend months collecting the inputs and compiling the master budget and I get no value from it during the course of the year. It's disruptive, wastes my employees' time and costs me money.
Isaiah: Rajvir, please sit down. I put a lot of effort into your budget; how is it possible you find it so unhelpful?
Rajvir: I don't know if it's this industry or our company, but every month we miss our targets by large margins-some months we're way over; some months we're way under-I can't afford to make decisions based on the master budget anymore. I think I'm going to quit the budgeting process. It's just not valuable.
Rajvir, frustrated, takes her leave. Moments later, Isaiah is contemplating Rajvir's lamenta- tions, and says to himself, "Wow, about 35 percent of my billable hours are spent on this budget. If I can't convince Rajvir that it is a valuable undertaking, I will have a lot of idle time on my hands. What can I do to convince her of the merits of budgeting? I had better call in my partner to discuss this."
Required:
You are the partner. How would you advise Isaiah to reason with Rajvir? In coming up with your answer, consider the following questions:
1. How should Rajvir use the budget?
2. What are the merits of budgeting for a new firm in a highly volatile industry?
3. How can you, Isaiah, and Rajvir change or improve the process?