Abstract
Since the use of business analytics promises automation of business processes and time savings, the budgeting process seems predestined for the integration of analytical methods. Therefore, this study examines the determinants of the use of business analytics in the budgeting process and its effect on satisfaction with the budgeting process. Specifically, we focus on one technical determinant (data infrastructure sophistication) and the importance of the two major budgeting functions (the planning and the evaluation function), which could affect the degree of dissemination of using analytical methods. Based on a survey among German companies, we find, as predicted, that the sophistication of the data infrastructure is positively associated with the use of business analytics in the budgeting process. Further, the more a company emphasizes the planning function, the greater the extent to which business analytics is used in the budgeting process. In contrast, we find no association between the evaluation function and the use of business analytics in the budgeting process. Finally, we find that the use of business analytics is positively associated with satisfaction with the budgeting process. Thus, the use of business analytics can help to overcome dissatisfaction with traditional budgeting systems. Overall, our findings provide practitioners with valuable indications under which circumstances the use of analytical methods appears reasonable.
Highlights
Budgets are widespread but are criticized just as strongly by practitioners and academics (Ekholm and Wallin 2000; Hope and Fraser 2003; Jensen 2003; Sivabalan et al 2009)
Our results show that the importance of the planning function is positively associated with the use of business analytics in the budgeting process
The use of business analytics in the budgeting process seems to be appropriate when a company puts a high emphasis on aspects such as planning, forecasting, coordination, and resource allocation
Summary
Budgets are widespread but are criticized just as strongly by practitioners and academics (Ekholm and Wallin 2000; Hope and Fraser 2003; Jensen 2003; Sivabalan et al 2009). There seems to be an upward trend for using quantitative modeling such as business analytics (Fotr et al 2015), which refers to the extensive use of data and corresponding sophisticated analyses These new advances can surpass human performance levels and help companies to improve decision making. Budgets are an important tool for short-term planning and control in organizations (Anthony et al 2007; Otley 1999) They assist companies in making decisions about alternative courses of action (Merchant and Van der Stede 2012) and allow them to reflect on their operating capacity utilization (Langfield-Smith et al 2005). Extant research identifies three major functions of operational budgeting: evaluation, planning, and control (Henttu-Aho and Järvinen 2013; Sivabalan et al 2009)
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