Budgeting in the time of COVID-19

The COVID-19 crisis is one of the worst events of our time, whose effects are changing the lives of nations, firms, and individuals across the entire world. According to the World Health Organization, as of January 29th 2022, the virus has taken the lives of almost 5,5 million people, and nobody still knows when this pandemic will come to an end. COVID-19 is not only producing devastating sanitary effects, but the world is also concerned about the economic ones, which are a consequence of the measures taken by the national governments to stop the virus from spreading. The International Labour Organization estimates that in January 2021, 93% of workers were living in countries in which some form of COVID-19 workplace closure measures were in place, and in 2020 the working hour losses are estimated to be worth $3,7 trillion, or 4,4% of global GDP. The crisis severely slowed the global GDP growth, increased the inflation rates, and in general produced an uncertain environment, which is posing multiple challenges to companies and organizations. The literature affirms that management control and management control systems play a key role in supporting the companies to overcome a crisis. Budgeting systems are considered to be the cornerstone of management control, but still scarce knowledge exits on the impact that the COVID-19 crisis had on them. The literature claims that implementing a budgeting system is fundamental to successfully run a business, but at the same time that in a turbulent environment its effectiveness might fall short. The research’s purpose is therefore to shed light on the effects that the COVID-19 crisis had on budgeting systems. To answer these questions we performed a qualitative analysis by interviewing the managers of 9 Italian companies. The results show that the crisis had a considerable impact on their budgeting systems, but their perceived value and utility in supporting the business has been almost unchanged. The results also highlight that management control is more and more assuming a central role in the organizations, which also thanks to the crisis, understood and realized its importance.