What are the Advantages of budgetary control
This budgetary control system helps in fixing the goals for the organization as a whole and concerts efforts are made for its achievements. It enables economies in the enterprise. Some of the benefits of budgetary control are:
1) Maximization of profit: the budgetary control aims at the maximization of profits of the enterprise. To achieve this aim a proper planning and co ordination of dissimilar functions is undertaken. There is a proper control over various capital and revenue expenditures. The resources are put to the best possible use.
2) Co ordination: the working of dissimilar departments and sectors is properly coordinated. The budget of different departments has a bearing on one another. The co ordination of various executives and subordinates is necessary for achieving budgeted targets.
3) Specific aims: the plans, policies and goals are decided by the top management. All efforts are put together to reach the common goal of the organization. Each department is given a target to be achieved. The effort are directs towards achieving some specific aims. If there is no definite aim then the efforts will be wasted is pursuing dissimilar aims.
4) Tool for measuring performance: by providing targets to various departments budgetary control provides a tool for measuring managerial performance. The budgeted targets are compared to actual results and deviations are determined. The performance of each department is reported the top management. This system enables the introduction of management by exception.
5) Economy: the planning of expenditure will by systematic and there will be economic in spending. The finances will be put to optimum use. The benefits derived for the concern will ultimately extend to industry and then to national economy. The national resources will be used economically and wastage will be eliminated.
6) Determining weaknesses: the deviations in budgeted and actual performance will enable the determination of weak sports. Efforts are concentrated on those aspects where performance is less than stipulated.
7) Corrective action: the management will be take corrective measures whenever there is a discrepancy in performance. The deviation will be regularly reported so that necessary action is taken at the earliest. In the absence of a budgetary control system the deviation can be determined only at the end of the financial period.
8) Consciousness: it creates budget consciousness among the employees. By fixing targets for the employees, they are made conscious of their responsible. Everybody knows what he is expected to do and he continues with his work uninterrupted
9) Reduces costs: in the present day competitive world budgetary control has an important role to play. Every businessman tries to decrease the cost of production for increasing sales. He tries to have those combinations of production where profitability is more.
10) Introduction of incentive schemes: budgetary control system also enables the introduction of incentive schemes of remuneration. The comparison of budgeted and actual performance will enable the use of such schemes.