Objectives of Budgetary Control

The following are the objectives of a budgetary control system:

1. Planning. A budget provides a detailed plan of action for a business over a definite period of time. Detailed plans relating to production, sales, raw material requirements, labor needs, advertising and sales promotion performance, research and development activities, capital additions etc. are drawn up. By planning many problems are anticipated long before they arise and

Objectives of Budgetary Control

solutions can be sought through careful study. Thus most business emergencies can be avoided by planning. In brief, budgeting forces the management to think ahead, to anticipate and prepare for the anticipated conditions.

2. Coordination. Budgeting aids managers in co-coordinating their efforts so that objectives of the organization as a whole harmonize with the objectives of its divisions. Effective planning and organization contributes a lot in achieving coordination. There should be co-ordination in the budgets of various departments. For example, the budget of sales should be in coordination with the budget of production. Similarly, production budget should be prepared in co-ordination with the purchase budget, and so on.


  

3. Communication. A budget is actually a communication device. The accepted budget copies are distributed to every management personnel which gives not only adequate understanding and knowledge of the policies and programmes to be followed however also gives understanding about the restrictions to be followed to. It is not the budget by itself that facilitates communication; however the vital information will be communicated in the work of preparing budgets and participation of most responsible men and women in this act.

4. Motivation. A budget is a helpful device for encouraging managers to carry out in line with the organization objectives. If men and women have actively participated in the planning of budgets, it acts like a strong motivating force in order to achieve the targets.

5. Control. Control is necessary to ensure that plans and objectives as laid down in the budgets are being achieved. Control, as applied to budgeting, is a, systematized effort to keep the management informed of whether planned performance is being achieved or not. For this purpose, a comparison is made between plans and actual performance. The difference between the two is reported to� the rr1anagement for taking corrective action.

6. Performance evaluation. A budget offers a useful means of telling managers how nicely they are performing in conference targets they have formerly helped to set. In numerous companies there is an exercise of rewarding workers on the basis of their reaching the budget targets or promotion of a manager might be linked to his budget accomplishment record.

Advantages of Budgetary Control

Budgetary control provides the following advantages:

1. Budgeting compels managers to consider ahead i.e. to anticipate and get ready for changing circumstances.
2. Budgeting co-ordinates the actions of various functions and departments of the business.
3. It increases production efficiency, eliminates waste and control-S the costs.
4. It pinpoints efficiency or lack of it.
5. Budgetary manage aims at maximization of income through control and careful- planning.
6. It provides a yardstick against which actual-results can be compared.
7. It exhibits management in which action is required to remedy a situation.
8. It ensures that operating capital is available for that efficient operation of the business.
9. It directs capital expenditure in the many profitable direction.
10. It instills into most- level-s of management a timely, mindful and adequate consideration of all aspects before reaching essential decisions.
11. A budget motivates executives to attain the given goal-s.
12. Budgetary control system creates necessary conditions for the introduction of the standard costing technique.
13. Budgeting also assists in obtaining bank credit.
14. A budgetary control system aids in delegation of authority and assignment of responsibility.
15. Budgeting produces cost consciousness and introduces an attitude of mind where efficiency and waste cannot thrive.