Budget And Budgetary Control

Budget And Budgetary ControlBudget and Budgetary Control ar the key components of whatever business and its decision making process. A business is an brass usually set up with an aim to attain success and bring some change in the society. However, in case of any business the success is determined by the profit or the value it added to the organization at the end of an year. Therefore, the calculations of the sales and expenditures are the basic concepts of any business.As mentioned, a business is set up with a goal to attain success and thus, as a prerequisite of attaining success one organization necessitate to be properly aware of all its operations and should also be capable of foresee its future operations. Farsightedness has often been described as a primary means to attain success. Thus, the success of any business is quite dependent on its predictions some future course of actions. In this case, predictions relate to the organisational turnover, business trends during a t ime period, expenditure patterns etc. All these demand to be put together to determine an organizational strategy which will avail the business sustain is growth or attain further growth. Further, in todays world business relates to funds and capitals raised through different sources, examples bank loans, take a chance capitalists, investors etc. All these people are interested in looking at the facts and figures that depicts the organizational success and a successful future course of actions. The facts and figures, mentioned herewith, look ats to be properly computed and presented in a form of statement. This document depicting the future of any business is known as compute.Budgetary affirm bear be described as complimentary concept defined by the budget. Budgetary control depicts different types and aspects of business expenses and ways of controlling the same. It concentrates on the expenditures and makes genuine that all the digresss and its activities acts accordingl y and fol pocket-size the budget properly. The budget stream-lined the expenditure pattern and helps an organization to carry on its activities smoothly.BUDGET GLIMPSE ON THE DIFFERENET ASPECTSA budget kindle be described as a financial plan for a business that has been prepared well in advance to demonstrate and govern the future course of work of a business.A budget may be set in money cost, for eg. a sales budget of an organization for the month of May, 2011 is 500,000 or it can be expressed in terms of units, for say, a purchases budget determining the number of units to be bought during the month of April, 2011 is to be 5,000 units. Budgets can also be put across in the form of income budgets for money received i.e. sales budget, or expenditure budgets for money spent, i.e. a purchases budget. However, a major emphasis has always been on the cash budget which combines both income and expenditure in estimating the business working capital, cash in hand and bank equilibrat e during a course of work or a time period.The budgets are usually prepared for the following financial years (budget period), and are usually dispirited down into shorter time periods in order to emphasize on the figures and their attainment/fulfillment. The periods are usually monthly or quarterly, determined based on the level of activities and its operations. This ensures budgetary control to be exercised over the budget the veritable results can be monitored against the budgeted figures. Incase, of better performance the organizations announce bonus, give increments to its employees however, incase of unfavorable figures, the discrepancies amid the two can be investigated and corrective action can be taken accordingly.BENEFITS OF BUDGET AND BUDGETARY CONTROLBudgets provide benefits both for the business, and also for its managers and new(prenominal) staffsThe budget assists think-Oncethe business objectives are set and formalised through a budget, it can b ensured that the other business plans are also achievable. It also helps in taking the output decisions of various goods and services and to make sure that everything is available at the right time.The budget communicates and co-ordinates -A budget is agreed by the business, and helps the different de take offment and sections within work towards a same end. It helps in of importtaining a discipline throughout and in assuring that all de digressments play in their own get off the ground in achieving the goal. The budget once set also helps in resolving any anticipated problems and other areas of potential confusion get clarified.The budget helps in decision-making process -as already own a budget helps in planning ahead and thus allowing the business to think an foresee ahead of time, they cannot save mold the form of goods and services to be served but also the purchase decisions which can help it in manipulating its prices.The budget can be used to monitor and control The most important bene fit of a budget preparation is helping a management to have budgetary control to monitor and compare the actual results. This further helps in adapting various actions in modifying the operations of the business as time passes, or possibly to change the budget if it becomes unachievable.The budget can be used to motivate and control A budget often acts as a motivating factor since provides the managers and other staffs a predetermined goals. This not only helps the business but also helps its employees since on fulfilment of the predetermined targets most of the organizations declare various types of bonuses and increments for its staff.LIMITATIONS OF BUDGET BUDGETARY CONTROLThough there are various benefits to the fact of budget and budgetary control, however, there are few limitations also and these are described belowi) Benefits of producing a budget should exceed its embodyBudgeting is fairly a complex process and for some businesses especially the small ones it may pose too much of a burden in terms of time and other resources, with only limited benefits. Nevertheless, most of the lending organizations such as banks etc. in todays era often require the budgets as part of the business plan in order to further proceed with their lending or investment decisions. In these cases, as a general rule, the benefit of producing the budget must exceed its cost.ii) Budgets are often not accurateBudget deals with estimations and predictions relating to future based on the figures of the past and the present. Therefore, a colossal risk is touch with it tending the figures to be wrong. A business highly dependent on budgets may found it difficult to succeed with wrong details put across. Therefore, great care needs to be taken with estimation of various facts and figures. Budgetary control is used to compare the budget against what actually happened the budget may need to be changed if it becomes unachievable.iii) The budget might demotivateEmployees at the ground level who do not possess any managerial rights or does not take part in agreeing and setting on to a budget might felt to be imposed upon them and thus might act as a demotivating factor. or else of encouragements it might pose a threat to employees since a non-attainment of the target might bring in some sort of difficulty for the employee.iv) Budgets might lead to dysfunctional managementThe targets might pose in a threat with employees in one subdivision of the business achieving more than their budgeted targets and create problems elsewhere. For example, a production division might achieve extra output that the sales department finds difficult to sell. The might create a chaotic situation and to avoid such dysfunctional management, budgets need to be set at realistic levels and linked and co-ordinated across all departments with proper informations.v) Budgets might be set at too low levelsBudgets being prepared by individuals can be prepared at low achievable rates since, the budget where too easy to achieve, will be of no benefit to the business and may, in fact, lead to lower levels of output and higher costs than before the budget was established. Budgets should make it sure, the best use of the resources available.BUDGETRAY preparednessBudget being an integral part of any business is often prepared well ahead of time and usually a concerned department works on preparing an accurate budget and has got planning regarding its successful preparationBudget Manual provides a set of guidelines as to who is involved with the budgetary planning and control process, and how the process is to be conducteda budget committee, which organises the process of budgetary planning and control in order to be the most effective, brings together representatives from the main functions of the business eg production, sales, administration and is headed by a budget co-ordinator whose job is to administer and oversee the activities of the committeeCONCLUSIONIn this repo rt, an attempt has been made to put across a detailed analysis of budget and budgetary control. The objectives of its preparation, benefits and limitations mentioned above should be capable enough to put across a picture whereby, all the informations about budget and budgetary control are easily available. Though, I tried my best to put across a brief overview on the whole concept, however, its not absolute, and is limited to the fact of knowledge, time and resources.However, after the brief analysis it is evident that besides having its various limitations also budget and budgetary control is an integral part of any business.