The technique or control that ensures managerial control over budget is called budgeting control.It helps in the allocation of various responsibilities for smooth running of organisation.
It also enables farms to achieve objectives with minimum cost and ensure efficient performance of the managerial functions.
Objectives Of Budgetary Control:
The first and most important of each budgets is to plan and find out what the ideal budget can accomplish.It ensures to draw a man for the effective achievement of objective or goals.It considered as means of combined intelligence of an entire organisation in a plan of action.It is primarily concerned with specifying the type,quantity and quality of service that will be provided.Normally it helps for achieving following purpose.
a.Action is guided by a well thought out plan.
b.The most profitable course of action is selected.
c.It bridge through which communicators are established between the management and operative level.
d.It serves as a mechanism for policy formulation.
The another objective of budgeting control is to coordinate various activity of the firm.It enables to secure cooperation inorder to successfully achieve for common objective of the firm.It is also helpful in co-ordinating the policy,plans and actions to undertaken.It also provides direction to the business and ensures comparison between the actual performance and budgeted performance.
The other most important objective of budgetary control is to control the activities of organisation.It is possible through continuous comparison of actual performance with that of the budget.It is considered as the process of looking back that consists of the action necessary to ensure the performance of organisation as per plan and objective.
4.Reporting and Evaluating
The last but not the least objective of budgetary control is to evaluate and report regarding the performance of organisation.It is a spontaneous process which is concerned with assessing a project effectiveness, efficiency,cost etc.The proper evaluation helps to improve both an ongoing project on making the future project.It also helps and decide measure to be taken for solving such problems.
Process Of Budgetary Control:
The budgetary control is considered as a continuous process that involves comparison of actual result with the budget.Normally the process of budgetary control are:-
1.Defination Of Objective
The step of budgeting control is to precisely define the objective of the organisation.It also clearly defines the areas of control and items of revenue and expenditure to be covered by the budget.
2.Location of keyfactor
The factor that has a significant row or total activity of an organisation is called a key factor.So the next step is budgetary control is to locate and estimate such factors properly for successfully achieving the goals.
3.Standard of output
The 3rd step of budgeting control is to fixed a standard of output,So that effective comparison to be made with actual.Therefore the result of past and situation of present should be studied by effective policies.
The next step of budgetary control is to prepare an organisation chart so that responsibilities can be assigned to each executives.It also considered as representative of various activities that ensure achieve organisational goals.
The centre which is concerned with cost control of each budget and certain expenses incurred is called a budget centre.It is the another important step for effective complementation of the budgetary control process.
The statement that consists of procedure forms and records relating to the preparation and use of budget is called budget mannual.It is primarily concerned with setout instruction governing responsibilities of a person.
The person who is appointed to line up various functions of the budget committee and circulate information is called controller.It enables inefficient preparation of budget and proper reporting.
The group of representatives of various functions of the budget is an organisation called budget committee.They are primarily concerned with taking various important decisions and carry on other discussions.
The period of time convert by budget is called budget period which is determine on the basis of nature of business.Generally it is divided into 2 types:-
i.Long term budget
ii.Short term budget
The final report that represents the comparison between actual and budget expenditure is called budget report.Generally it contents the finding or conclusion of a budget.
Essential of Budgetary Control:
1.Support of top management
The effectiveness of the budgetary control system depends upon the support of each and every member of management specially it requires the support of stock management for successful implementation of principle and policies.
Another important essential of an effective budgetary control system is its reasonable goals.That means the goal or objective of a budget should be realistic and objective by taking reasonable efforts.
The clear objective is yet considered as another essential of an effective budgetary control system.it means the objective of a budget should be clear and definite that doesn’t create any conclusion.
The person those are entrusted with the performance of budget is called responsible executive.They should participate in the process of setting of budget and there proper implementation.
5.Appropriate acounting system
There is a close relationship between budgeting and accounting so the effectiveness of one directly depends upon another.Therefore successfully budgetary control is only possible through the reliable data and responsibility accounting.
The profit each considers as life blood of each every activity of human being.So it is the ultimate objective of realising maximum profit of each organisation which is always to be kept open.
Another important essential of the budgetary control system is constant vigilance.It is required the continuous comparison between budget and actual data in order to report.
8.Continues budget education
The system of providing information about the objective and technique of budget to its staff is called budget education.So it must be carried on data regularly for the effective implementation of budget.
9.Cost of the system
The expenses to be incurred for the implementation of a budget system is called cost of the system.Generally steps must be taken to ensure that the cost of the system should not be more than the benefit received from such a system in any case.
10.Co-ordination with standards
The last but not the least essential of a budgetary control system is coordination with standard costing.It must be prepared in coordination with standard cost for expressing effective control and maximising profit.
Duties Of Budgetary Controller:
The person who operates and records the technique and control over the budget is known as the budgetary controller.Some of the basis duties of Budgetary Controller are highlighted below:-
i.To create co-ordination among the various functional managers and provide guidance.
ii.To revise and amend the budget manual as on when regular e.
iii.To prepare a budget programme and issue instructions.
iv.To discuss the proposed requirement of the department and overall budget.
v.To prepare a summary budget in consultation with the budget committee.
vi.Collect actual cost from cost office and compare it with budgetary figures.
vii.To revise budgets according to the direction of the budget committee.