Budgeting

Advantages of Budgetary Control to the Management

Budgetary control is an important technique of directing business operations in a desired direction. It is planned to assist the management in the allocation of responsibility and authority, to aid in making estimates and plans for the future, to assist in the analysis of the variations between estimated and actual results and to develop basis of measurement or standards with which to evaluate the efficiency of operations.

Advantages of Budgetary Control to the Management

The following are some important contributions of this system to the over-all control of business activities :

(A) Improvement in Planning

(1) Intelligent consideration of future events,

(2) Clarity of Objectives,

(3) Specificity in Planning,

(4) Best utilization of Resources,

(5) Delegation of Authority and Responsibility.

(6) Stability in Business Operations,

(7) It enhances the collateral value of the enterprise.

(B) Aid in Co-ordination

(1) It promotes a balanced procedure of activities,

(2) It promotes mutual co-operation and team-spirit-,

(3) It motivates the people,

(4) It brings co-ordination among business policies, plans and procedures also.

(C) Tool of Comprehensive Control

(1 ) It helps in controlling the cost and performance,

(2) It brings efficiency in communication system.

(D) Other Benefits

(1) It is assists in standard costing also,

(2) It evaluates the performance,

(3) Management by exception becomes feasible.

Thus, we see that Budgetary control system is advantageous for all types of organizations whether large or small. Some people hold the view that due to uncertainties budgets become impracticable. But the principal reason for this is the attitude of rigidity towards system. Whether the above said benefits are realized and to what extent, depends very much on the system and the attitude of management. If budgets are administered wisely, the benefits are bounded to occur. The system to be followed, should be designed according to the characteristics and needs of the enterprise.

To conclude, in the words of C.T. Horngren-If budgets are administered wisely, they compel management planning, provide definite expectations for judging subsequent performance and promote communication and co-ordination among the various segments of business.

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