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  Benefits of Budgetary Control

Introduction to Benefits of Budgetary Control

The benefits of budgetary control lie in three primary fields of business activity-

1. Planning

2. Co-ordination

3. Control

Within each of the above fields, various advantages accrue, similar have been described here under:

Planning

1. Most of us favour to postpone hard decisions until need compels. In the business also, people are generally opportunists, they wait till a decision is forced. Intensive study, that is to many a distasteful exercise, is not taken up earlier and when the troubles crop up abruptly, most easy immediate escape is resorted to. Budgeting in stills into the organisation the habit of careful study before decision is put to action.

2. The budgeting process acquires the assistance of the entire organisation in determining the most profitable course, so the bias or prejudice is removed and the final plans are expressive of the combined judgment of whole organisation.

3. While the aims are not the product of expect rather the logical sequence of carefully laid plans, the executives can command the cooperation and loyalty of their associates. This leads to successful implementation of the programmes.

4. The organisation should be schooled in essential policies that are the real guide to a business. The budget procedure gives a vehicle by which basic policies are periodically re-tested, restated and set forth as guiding principles for the organisation at large.

5. Budgeting involves in itself the most effective make use of physical equipment and other facilities. It assists in checking waste related to their uneconomical use.

Co-ordination

6. If in some divisions of business, there is doubt of programmes, full steam cannot be useful in other divisions. To protect full power of united action, it is necessary to properly time and coordinate the effort of all the divisions. Budgeting assists in acquiring co-ordination of human effort under the organisation.

7. The plans of the business must reflect courage or caution relies upon the supposed usual trend of business or economic conditions. Budgeting helps the management to co-ordinate the activities of the business to the signals or high and low economic trends. Specifically the danger signals that act as forerunners to the business are imitated in budgeting that cautions the whole organisation well in advance.

8. Budgeting guides to a balanced and unified programme and by it the capital and effort are directed into the very profitable channels. In which planning and decision-making is prepared on a day to day basis, the programme often becomes unconsciously wrapped. Careful advance planning results in balancing of factors and a proportionate emphasis on production, sales, finance, inventories etc. This guide to attainment of aims lay down.

Control

9. A searching inquiry into each contemplated expenditure and so the cause an analytical approach extending to each function and every department of the business will constitute an effectual avoidance of waste.

10. The budget gives a valuable tool of control over specific business operations, example quantity to be produced, and investment in plant, quantum of expenditure to be incurred for sales promotion etc. Expenditures are restricted and directed into the channels that offer maximum return. Specific activities can be controlled if sales and production performance does not meet the hope.

So, budgeting serves like a communication device that allows a full and free interplay of ideas with the aims of selecting the best plan. This is the role of budgeting like a management tool of planning. The most possible plan is put to action and budgeting is employed as a control mechanism through the management by assigning responsibilities for implementation of the plans. In an effective environment, the essential co-ordination is acquired in both planning and control aspects of budgeting. To precise, budgetary control acts like a friend, philosopher and guide to the management.

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