This is a criticism of traditional budgeting. Those who criticize it question why a budget needs to have a fixed time horizon such as one year. They say that different segments of the same company have different needs for planning. The purpose of a forecast should be to recognize issues that need to be planned for in time to plan for them, and this will be different for every area of the company. So different forecasting horizons are needed for different areas, and they need to be monitored individually. One size does not fit all in an organization today.
This is a criticism of traditional budgeting, because this can occur. Actual performance for a period is measured against budgeted performance for that period. While it is necessary to wait until the end of a period to measure the budgetary variance for the whole period, the budget period can be broken into smaller timeframes. A 12 month budget can, and often will, be divided into monthly amounts to allow for current month and year-to-date budget variance reporting throughout the year, so that operational adjustments can be made as necessary.
This is not a criticism of the traditional budgeting process, because it is not a feature of any budgeting process, traditional or non-traditional. A budget is quantitative and does not include non-financial measures in its output at all.
This is a criticism of traditional budgeting. The traditional budgeting process may lead to across-the-board cuts when early budget iterations show that planned expenses are too high. However, budgeting should not necessarily require across the board cuts, even when expenses are higher than desired. Cost cutting should be based on what is best for the organization. Frequently cuts based on what is best for the organization will not be equally distributed.
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