Budgetary Control
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.
“It’s clearly a budget. It’s got a lot of numbers in it” (George W. Busch 2005). This definition of a budget can be supplemented using the Oxford dictionary, which states that a budget is an estimate of income and expenditures for a set period of time. Nowadays almost every business uses budgets and managers use them as a tool in order to set targets. In other words managers can, with the use of budgets, explain in a financial way what are the objectives of the business for a period of time, usually one year. Budgetary control is described as the process of planning, controlling and coordinating through money values and departments within an organisation (Buckley and McKenna 1972), and has recently taken a greater importance in performance management. In parallel, the relation between the corporation and the capital market has kept increasing, bringing to light many problems. This essay will then define and explain the benefits of budgetary control as well as its limits regarding the capital market. Eventually, it will attempt to find a solution to those problems.
A budget in an agreed plan of action used to provide direction and co-ordination, giving more structure to an organisation as well as motivating staff to achieve objectives. Performance management is described as “the process of quantifying the efficiency and effectiveness of an action” (Neely, Kennerley and Adams, 1995). To achieve performances, managers have to be in control. There are two types of control, namely budgetary and financial. According to Hofstede, budgetary control is planning translated into money terms (1968). Its process consists for the managers to set up agreed performance standards, and
“It’s clearly a budget. It’s got a lot of numbers in it” (George W. Busch 2005). This definition of a budget can be supplemented using the Oxford dictionary, which states that a budget is an estimate of income and expenditures for a set period of time. Nowadays almost every business uses budgets and managers use them as a tool in order to set targets. In other words managers can, with the use of budgets, explain in a financial way what are the objectives of the business for a period of time, usually one year. Budgetary control is described as the process of planning, controlling and coordinating through money values and departments within an organisation (Buckley and McKenna 1972), and has recently taken a greater importance in performance management. In parallel, the relation between the corporation and the capital market has kept increasing, bringing to light many problems. This essay will then define and explain the benefits of budgetary control as well as its limits regarding the capital market. Eventually, it will attempt to find a solution to those problems.
A budget in an agreed plan of action used to provide direction and co-ordination, giving more structure to an organisation as well as motivating staff to achieve objectives. Performance management is described as “the process of quantifying the efficiency and effectiveness of an action” (Neely, Kennerley and Adams, 1995). To achieve performances, managers have to be in control. There are two types of control, namely budgetary and financial. According to Hofstede, budgetary control is planning translated into money terms (1968). Its process consists for the managers to set up agreed performance standards, and