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Advantages Of Budgetary Control

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“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.” Critically evaluate this claim, supporting your discussion with both theoretical arguments and practical examples.

Budgetary Control Definition
The financial resources in a formal statement allocated for particular activities in a company in a stipulated time frame of usually 3, 6 or 12 months is known as a budget. Budgetary control is the comparison between budgets with actual operational results and one of the major aspects of management control would be …show more content…

Advantages of Budgetary Control and Budget
There are always two sides to a coin and despite having some disadvantages, there are also advantages to having a budgetary system in an organisation.
There are countless advantages to a budget system and the budgetary control in an organisation. To begin with, having a structured budget allocated to individual departments can compel the management to think further about the future, which is probably one of the more important feature of a budgetary plan. It ensures that the management would look ahead to set out detailed plans in order to achieve targets to anticipate and give the organisation a purpose and direction. The greatest advantage of budgetary control is that it makes a clear view of businesses to ensure that the plans laid for the future are achievable and it gives managers a distinct direction when carrying out day to day activities with their team to ensure that every business day in that financial year would be beneficial and driven towards the goals …show more content…

With a budgetary control plan, an organisation can then set short term and long term goals in order to better answer to shareholders and investors as well as to meet their expectations of dividends pay out at the end of every financial term.
However, the management team of an organisation could be at risk of losing prospected resources, bonuses and ultimately their jobs if they are unable to achieve these short term goals and targets set by the budget. When too focussed on attaining these short term goals, managers would at times neglect the long term corporate strategies of the organisation and be too short sighted which would be dangerous for the firm as they would not be able to see ahead in the future and plan their scarce resources in the long

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