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Importance of Budgetary Control

>> June 21, 2010

Simple Introduction of Budgetary Control

Budgetary control is the one of best technique of controlling, management and finance  in which every department's budget is made with estimated data. After this, manager compares the estimated data with original data and fix the responsibility of employee if variance will not be favourable.

In other words, to make budget and control the business is key tool in budgetary control.

Importance of Budgetary Control

1. To Use the Forecasting Techniques

It is the importance of budgetary control that with this, we can use the forecasting techniques. Three departments work hard for calculating best estimation of future. Accounting department provides old data. Statistical department provides the tools and techniques of forecasting like probability, time series other sampling methods. Management department uses both department services to estimate the expenditures and revenue of business under the normal conditions of business. So, no department say anything wrong in making of budget. So, it is necessary for business to use budgetary control techniques.

2. Fix the Responsibility of Departments

Department's scientific name is cost center. Manager makes budget and show the target of company and employees are given the powers to perform these targets. After checking the variance in budget through budgetary control process, manager can fix the responsibility of each department and its employees in a particular cost center.

3. Effective Utilization of Company's resources

Company can only effective use its resources, if someone stops misuse of money and fund of company. If budgetary control is used in company, at that time, no action will be taken before making budget. Responsible personal of company will be accountable for his action. Suppose, company has fixed the target of company's annual Sale is $ 40,00,000 after participating sales manager in the setting of  this sale budget. Now, after one year, if sale is just $ 1,00,000. This sale manager must say what is the reason for not selling the product up to standard level of sale.

4. Excel yourself

After using budgetary control techniques in your business, you will definitely learn the skills of excel yourself because we all know that a budget is based on estimates, it may or may not be true. But continually practise of making good budget and apply in organisation, manager can learn skills and experience for increasing the efficiency in every work of company. Meaning of this, manager will get positive approach through budgetary control.

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