Why Budgetary Control is Important for Business to Earn Maximum Profitability?

(Finance, Accounting, Taxes & creative knowledge)

Budgetary Control is important for Business to earn maximum profitability

 “A control established through budget is budgetary control.”

“Budgetary control is defined how to outcomes to reach in to the maximum profitable.”

The finance function has to deal with one of the most important decisions about the amount to be invested in fixed assets and the decision is strictly in the form of “budgeting”.

Any industry or business can’t be run and managed without proper planning and budgeting. Budgeting itself is one of the tools of planning.

A budget is nothing but a plan relating to future. Budget is a statement of various activities to be performed in future and these activities are supported by funds. Control exercised for execution of budgets is termed as budgetary control. A business budget is a plan covering all phases of operations for a definite period in future. Business budgets co-ordinates the activities of various departments and actions. Budget provide a means of co-ordination of a business as a whole. Budget is also one mode of communication.

Budget is different than forecasting.  Forecasting mean just guessing of probable events or things which is just thinking & feeling. It doesn’t has any background or history or it does not require any monetary support. But on other hand budget means not only guessing but it is a statement /list of activities to be performed and which are supported by estimated incomes and expenditures. Budget is prepared on basis of any particular past experience, and historical background and it is prepared by some expertise or by any committee. Budget may be expressed in terms of money or quantity or both and it should be development prior to the period during which it is to be operated. Budget is set for a definite period. Budgeting lay emphasis on the necessity for advance decision on future course of action to be followed, it points out the result which would occur by following courses of action. In budgeting system plans that are laid down by the top management are passed on to those who are responsible for putting them into action.

In industries various type of budgets are prepared like sales budgets , proper co-ordination and linking is required to be maintained and proper care should be taken so that these budgets should not be overlapping. Budgets teach team essence and are like putting so many heads together to solve a common problem.

A business budget is a plan covering all stages and areas of business operation for specific period of time. It is a sort of formal expressions of policies, plans, objectives and goals, laid down in advance. Budget is an instrument of control. The technique of budgeting is a continuous process and as such it seeks to evaluate continuously the work of performance of the executives. The success of budget depends upon the team work.

Budget is not the mere matching of estimated expenses with probable incomes. General objective of the budget is to enable the management to carry out its basic functions of planning, controlling and coordinating all operations of the enterprise smoothly and effectively.

 

Key Words

* Budgetary control is a structure of controlling cost of organization.

* A budget is nothing but a plan relating to future.

*It is a statement of various activities to be performed in future and these activities are supported by funds.

*A system of budgetary control should not become inflexible.

* It is Co-ordinates the activities of various departments and actions.

*It is includes preparation of Budgets coordinating the departments and founding tasks.

* It is one mode of communication.

* It is comparing performance with budgeted and acting upon results to achieve the maximum profitable.

*it is different than forecasting.

* Supported by estimated incomes and expenditures.

* It is prepared by some expertise or by any committee.

* Budgets teach team spirit and are like putting so many heads together to solve a common problem.

* It is a plan covering all stages and areas of business operation for specific period of time.

* It is a sort of formal expressions of policies, plans, objectives and goals, laid down in advance.

* The success of budget depends upon the team work.