BUDGETARY CONTROL SYSTEM

BUDGETARY CONTROL SYSTEM

Budgeting is a planning process in which expenditure and revenue of the organization over a specific time period are accounted for "Budget" is a plan document and a financial statement, which provides details of the proposed revenues and their utilization for expenditure for a specific period, usually a year. It is a means for check and control on what money should be received and how they are to be spent.

NEED FOR BUDGETARY CONTROL

Continuously monitoring the operations to examine how the operations are carried out, whether there are any deviations, the causes for deviations and ways to rectify deviations within a week or month will be of immense benefit. Though a budget is prepared once in a year, the budgetary control process is a day-to- day, week -to week, fortnight-to-fortnight, month-to-month and quarterly-to-quarterly activity for a check on all revenues and expenditures budgeted and stated beforehand. Continuous review of the of the situation is done taking into account the actual as well as committed expenditure till date so that the goal are reached by the end of the year rather than leaving in to chance.

ADVANTAGES OF BUDGETARY CONTROL SYSTEM

It is necessary for a manager to understand the strengths and weaknesses of budgetary system in general, and budgetary control system in particular, to enable him to use it as a proper tool of management.

i. The greatest strength of budgeting lies in its use of rupee language i.e., use of a single common denominator for a great many diverse actions and things. It defines the objectives of an organization as a whole and in financial terms.

ii. Budget deals directly with efficiency, which is the main concern to every organization. It provides yard stick to measure efficiency of various units of the organization.

iii. Budgetary system helps managers to learn from past experience.

iv. Budget under various functional units indicates the limits for expenses and results to be achieved.

v. Budgetary control system reveals the extent by which actual results have varied from defined objectives.

LIMITATIONS OF BUDGETARY CONTROL SYSTEM

i. Inefficient employees may feel suspicious of budgetary control system that it is used to evaluate the results or consider it as a way of implementing cost reduction programme and hence fail to cooperate wholeheartedly.

ii. A budgetary control system may sometimes become very cumbersome, time consuming and unduly expensive and require additional efforts, costs and manpower to perform.

iii. Budget and budgetary control systems tend to create internal conflicts and pressures among different departments or units.

iv. Budgetary control system may open up the dictatorial behavior on the part of the top management. This can be seen in setting standards, calling for an arbitrary cut in expenses, etc.

v. The process may become routine with complacency of paper work and a little notice or action taken. As such budgets may not help in solving day-to-day problems of supervisors but help to analyze the past performance and projecting the possible future.

HOW BUDGETARY SYSTEM CAN OPERATE EFFECTIVELY TO INCREASE MARKET SHARE

While budget is a financial statement, which provides details of the proposed revenues and their utilization for expenditure for a specific period, the budgetary control is the process of comparing what was planned with what has been accomplished during the period. A budgetary control system helps to measure the progress made towards goals, to uncover deviations, to initiate corrective actions, to know the causes for deviations and hence to avoid leaving things to happen as the happen. therefore in other to increase market share through effective budget control, when budget are properly followed, supervised and executed there is always reduction in time, cost and wastage these extra resources if re-invested into the business and using the appropriate market business strategy by expanding the total market, expanding the market shares and also by protecting the market share. Expanding the market share can be by stimulating the products usage, creating new users for the products and also finding new users of the products this could be achieved by advertisement, products sensitization, seminars presentations and trade fairs

Also in other for the market share to be increase the shares need to be protected by applying pre-emptive defense strategy there by keeping our competitors of balance in this case we identify our current products strength and weakness we build on them and create a very good competitive advantage by striking first lunching new and improved brand into the market and close all windows of opportunity for other competitor in this way our shares will be protected and our share price improved

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