Objectives of Budgetary Control –

Objectives of Budgetary Control

The main objectives of budgetary control are as under:

1. Planning

Budgetary control forces the management at all levels to plan, in time, all the activities to be done during the future period.

2. Co-ordination

Normally, employees are efficient. If they are not considered efficient, they would not have been recruited. Most of the employees can work very efficiently, individually, but they fail to deliver better or improved results when they work, as a group. Majority of the functions in an organisation cannot be done in isolation. The functions, be it production or marketing, are to be performed in a greater coordination for smooth completion and better results. Budget exercise develops team spirit amongst the employees to work in a coordinated manner. The role of Budgetary Control is immense in integrating the activities of different departments. Budgetary Control forces executives to think and think as a group.

3. Communication

A budget is a communicating device. Budget cannot be achieved without communicating to the concerned, what is expected of them to achieve. The approved budget shows, in detail, the plans of management, which are communicated to the concerned departments. This would help them to give adequate understanding and knowledge of the programmes and policies, but also the restrictions to which the organisation is expected to adhere to. For example, maximum amount that can be spent on advertisement, maintenance will be brought to the knowledge of the executives for exercising the restraint and achieving the results.

4. Control

Control refers to that action, necessary to bring the performance according to the original plan. Control is possible with pre-determined standards laid down in the budget. Budgetary control becomes possible with continuous comparison of actual performance with that of budget to find out the variances and report them for necessary corrective action.

Standard Costing and Budgetary Control are complementary to each other for achieving improved performance in an organisation.

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Limitations of Budgetary Control

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