Budgetary Control

Submitted By – Harsh Rawat, Ronish Jain and Sashwat Gupta

What is a Budget?

 Budget is a financial plan of spending that shows income and expenses.

 Creating a budget is to effectively manage personal or organizational finances
by predicting future financial activity and setting spending limits.
 This tool helps you track your spending, identify areas where you can save
money, and make informed investment and saving decisions.
 Businesses and organizations can prepare their budgets monthly, quarterly,
or yearly.
What is Budgeting?

 Budgeting is the process of making a plan to spend money. If your expenses

are more than your spending, you can use the planning process to prioritize
the more essential things.
 It involves making a comprehensive list of expenditures or focusing on a few
categories. Some companies use to prepare budgets using spreadsheets, while
others use budgeting apps.
  Budgeting is the cost control technique wherein the actual cost is the
compared to the budgeted cost and thus is aimed at profit. 
What is Budgetary Control ?

 Budgetary control is a procedure that ensures that organizations’ actual

revenue and expenditure adhere to the financial plans or not.
 This system controls budgets by coordinating with various departments,
establishing budgets, and comparing them with the actual results.
 It implies regularly comparing actual expenses with the planned income and
expenses. The purpose of preparing is to ensure taking corrective measures in
case of any variances.
 Steps in Budgetory Control Process.....

 Setting Financial Objectives: The first step in the budgetary control process is to
determine the organization’s financial objectives. This might include increasing
revenue, reducing costs, improving cash flow, or increasing profit margins.
 Developing the Budget: The next step is to develop a comprehensive budget that
outlines expected income and expenditures for a specific period. This might include
creating separate budgets for different departments, products, or projects.
 Implementing the Budget: Once the budget has been developed, it must be
implemented within the organization. This might involve communicating the budget to
employees, creating systems to monitor and control expenditures, and making
necessary changes based on employee feedback.
Steps in Budgetory Control Process....

 Monitoring Performance Against the Budget: The final step in the budgetary control
process is monitoring performance against the budget. This might involve comparing
actual expenditures and revenues to budgeted amounts, tracking cash flow, and
reviewing financial reports.
 Example: After six months the budgeted expenditure on salaries was set at $120,000.
However, the actual spending on salaries in those six months totalled $132,000. The
difference between these two figures is $12,000. This represents the variance from the
budget. In this case the variance is negative.
 Taking Corrective Action: If the organization is not meeting its budgeted targets, it
may be necessary to take corrective action. This might involve reducing expenditures,
increasing revenue, or making changes to the budget itself.
Objectives Of Budgetary Control

 Planning: A budget presents the plan, objectives and policies of an enterprise

and expresses them in numerical terms. It provides management with a plan of
operation to be followed during a specified future period.
 Directing & Co-ordination: It is the process by which each sub-division of a
concern works towards the common goal or objective with due regard to all
other sub-divisions. One of the objectives of budgeting is to avoid the
conflicting decisions and guide every manager towards the common goal.
 Controlling: Nothing can be achieved by merely laying down the objectives and
hoping that the desired organisational objectives will be accomplished.
Planning also generates the need for control. In fact, the implementation of
budget is, in itself, a control function.
 ADVANTAGES OF
BUDGETARY CONTROL
.
ADVANTAGES
THE FOLLOWING ARE THE ADVANTAGES OF THE BUDGETARY CONTROL

1. IMPROVED PLANNING AND FORECASTING.

2. INCREASE EFFICENCY.

3. BETTER DECISION MAKING.

4. IMPROVED FINANCIAL PERFORMANCE.

5. INCREASE ACCOUNTABILITY.
CONCLUSION
 Budgetary control is a crucial aspect of managing business finances
by setting budget ,monitoring performance again those budgets
and taking corrective action as needed, organisations can improve
their planning and forecasting abilities,increase
efficiency ,improve financial performance by implementing control
system organisation can use their financial resources effectively to
achieve their goals.
 However it is Important to note that the budgetary control is not a
one time process it requires on going monitoring and adjustment to
remain relevant and effective it is also important to involve all
relevant take holders in this process including
employees ,managers and stakeholders this helps to ensure that
everyone is aware of the budget the financial target and their role
in achieving those target.