Control: Controlling function is made to be effective as the control is centralised while budgets are prepared and implemented. Every part of the organisation should be represented on the committee, so there should be a representative from sales, production, marketing and so on.
Meaning and Definition of Budgetary Control: Budgetary control is the process of preparation of budgets for various activities and comparing the budgeted figures for arriving at deviations if any, which are to be eliminated in future. Communication A budget is one means by which agreed-to goals are communicated to all departments of the organization.
The managers of different departments are made responsible for their departmental budgets. Corrective Action: The management will be able to take corrective measures whenever there is a discrepancy in performance.
Economy: The planning of expenditure will be systematic and there will be economy in spending. Similarly, other factors may also improve at different times. It identifies if there is any issue or chance of improvement with input material procurement, the desired output from the material, any processing issue or sales team administration.
Flexibility: Budgets are prepared on the basis of certain conditions. Ineffective coordination leads to inefficient performance. Coordination: Budgets are helpful in coordination of business activities.
We have the option of selecting the quarterly average or yearly average. It requires managers to identify departmental, operational and individual managerial objectives and create a plan of action in which scarce resources are allocated efficiently to achieve objectives.
The comparison of budgeted and actual performance will enable the use of such schemes.