Budgetary Control As An Assessment Tool

Budget management analysis is used by mangers as a tool and helps determine that all resources available are being used efficiently. The budgets are determined yearly and are based upon the previous year’s budget and variances. This paper will discuss specific strategies to manage budgets within forecast, compare five to seven expense results with budget expectations, describe possible reasons for variances, give strategies to keep results aligned with expectations, recommend three benchmarking techniques, and identify those that might improve budget accuracy, and justify the choices made.

The budget process is a powerful planning tool for government to make important resource decisions. According the Carney and Schoenfeld‘s article on How to read a Budget, an operating budget is a reflection of government’s financial plans. When a budget is

Budget controls are very time consuming, it is a process that requires a lot of time to understand and adopt into ASDA’s business plan. The time these employees invest into the budgeting process hinders them from carrying out their other assigned roles and responsibilities.

Since a company’s’ budget is typically based on knowledge from their financial history therefore, if a budget variance occurs, it can be because inaccurate estimates were done, or one or more factors have changed unexpectedly, and the company need to make some type of adjustments to their budget. Once a company discovered a significant budget variance, they will need to identify the cause, and address it accordingly. For example,

Giving the responsibilities of creating and executing the budget to department heads or at least a committee of qualified staff members is a educated move because they have the best understanding of the day-to-day operations and needs of their departments. If any problems did arise within the budget of any department, then the power would shift up to the director and the board members. They would be responsible for raising additional money to fill any “income gaps” they find reasonable (Lord 161).

A company's budget serves as a guideline in planning and committing costs in order to meet tactical and strategic goals. Tactical goals such as providing budgetary costs for daily operations, and strategic objectives that include R&D, production, marketing, and distribution are all part of the budgeting process. Serving as a guideline rather than being set in stone, the budget is a snapshot of manager's "best thinking at the time it is prepared." (Marshall, 2003, p.496) The budget is a method in which to reign-in discretionary spending, and will likely show variances between what costs have been anticipated and what costs are actually incurred.

By linking cost management efforts to budgeting, companies improve the quality of information available for managers to use in developing their budgets. Accurate cost information is fundamental to budgeting. Companies that use accurate cost management techniques and provide budget developers with ready access to cost information improve both the accuracy and the speed of their budget process.

Budgets serve five main purposes; planning, facilitating communication and coordination, allocating resources, controlling profits and operations and evaluating performance and providing incentives. The budgeting process requires both technical and interpersonal leadership skills to achieve each of these purposes effectively. The director’s memo demonstrates several short comings in the budgeting process. The director instituted the “responsibility accounting system” as a means of evaluating performance. However, the DPW director has not consulted Sam in the budget process. Sam understands that his total expenditures are impacted by relatively unpredictable events that contribute to an uncontrollable element of his cost. The

A budget can be disadvantageous also. There is judgment and subjectivity in the budgeting process. It does not consider quality and customer service. Budgets can be seen as pressure devices imposed by management, thus resulting in: bad labour relations. Budget could results departmental conflict arises due to disputes over resource allocation, and departments blaming each other if targets are not attained. It is difficult to reconcile personal and corporate goals

No project is done perfect the first time; there is always a chance an error that needs correction or new ideas to make it perfect. So it is with creating and monitoring a budget. Having an accommodation for changes in a budget is a very good practice. It helps managers and budget developers respond to competitive setbacks or breakthrough more precisely and quick; by using available resources for good opportunities or correction of errors.

Budget is time-consuming, especially if it involves a poorly managed company. The budget only pays attention to the quantitative aspect of business while neglecting the qualitative aspects. It does not consider the quality of services or goods and therefore inconsiderate of customers’ satisfaction. Another disadvantage of a budget is that it is inaccurate. A firm rarely “makes budget.” The hope is that the business activity will be close to the budget, but it could be off considerably and lead to bad hiring, spending and production decisions. This is because budget preparation is based on assumptions and thereby changes in the business environment could lead to unachievable

Budgetary control is part of overall organisation control and is concerned primarily with the control of performance. The use of budgetary control in performance management has of late taken on greater importance especially as a more integrative control mechanism for the organisation. Discuss.

Deliberate control of an organization 's operations through foundation of models and targets in regards to pay and consumption, and a consistent checking and modification of execution against them.

5. The success of budgetary control depends upon the support of the top management. If there is lack of support from top management, then this will

Budget and budgetary control practices though very essential to meeting organizational goals, are mostly hastily and improperly prepared. This eventually leads to unfulfilled budget and budgetary control practices.