Budgeting can be defined as a solid process to decide the estimate of revenue and expenditure for the specific time period. This definition of budget serves for all, country, city, state, business or personal matter. It is observed that, each successful company never moves forwards without deploying budget process (Al-Shawabikah, 2000). So, talking about Personnel Budgeting, it is one of the crucial aspects of any business to keep labor or personnel budgeting in the mind at the start and end of the year to maintain or increase productivity and profitability of the business. In fact, it is similar to an operational plan, represented in the financial terms considering income and expenditure’s estimation (Dees & Paul, 2004).
I Introduction A budget is part of management control designed to provide support to critical functions within an organization and it assist the organization to establish how to effectively and efficiently utilize its resources. The success of budgeting system is dependable on the attitude and acceptance by employees affected by it. It is important for any organization to have a budget control system and to establish the impact it has a on the employee behavior such as their motivation and dysfunctional behavior, therefore it is important that the organization’s management and its employees have a general agreement on the budgetary control system to ensure a great success in the implementation of it. Advantages and disadvantages of budgetary
Setting targets that are realistic and clearly stated will encourage employees to make more effort to achieve it than they might otherwise do. However, the motivational effect of budgetary control is far from clear, as we shall see later in this report. In addition, there is no point in having targets and controls if they are kept a secret. Through communication, organisations can enhance the level of information that flows from top management to employees
It makes proper coordination and communication across the organization. Budgetary control leads to achieve economies of sale, efficiency and effectiveness which increases the profitability by waste reduction. Since budgetary controls continuously monitor the operations of organization, it can take immediate actions for correct the variances or take prompt action to set new standards. Budgetary controls helps to plan, communicate and delegate the activities of an organization and allocate the resources which required to achieve the desired result. It also monitor and measure the performance of an organization to identify the variations and takes corrective actions for achieve the
3| Factors Influencing Budgeting and Their Implications on Performance and Behavior 3.1. Contract Type The type of employment contract an employee receives influences his behavior and performance. Companies frequently use budget-based contracts, where the final compensation is linked to whether the employee attains a budget goal. In some contracts, there is additional compensation when the budget goal is outperformed. There has been a lot of prior research about the influence of budget-based contracts, both on individual and on group performance.
Another function of the budgetary control system is to enable management to examine the potential successes or failures of the company as it allows for actual performance to be measured against targeted performance. Lastly, the budget control system is put in place to enhance coordination between different departments in the organization as different departments are assigned to implement various policies and functions in the budget. Its function is also to ensure there is somebody to take responsibility when budget expectations are not
According to Edafalje (2011), budget represents the accounting instrument used by an organization to plan and control the operation of the organization. The budgeting process may be carried out by companies to estimate whether the company can proceed with its projected income and expenses. Holding a formal and structured budgeting process is the basis for good business management, growth and development of an organisation. Planning should be the major component of the business budgeting process to ensure the organisation achieve both short and long term goals. Research shown that good planning will typically reduce the cost of a project by about a factor of ten (10).
Budgeting acts as a motivator to staffs when targets are met, increases performance efficiency, eliminates misuse and controls costs, coordinates the activities of the various departments as far as operations are concerned, so that plans and objectives laid down in the budgets are achieved. 6.1.4 Relationship between budgetary controls and organizational performance The consultant also found out that there is a substantial relationship between budgetary controls and performance. Therefore, management of icddr,b try to address the problems that hinder the attainment of the set targets. 6.1.5 Factors affecting budgetary controls and performance In establishing and examining the limitations of budgetary controls in icddr,b, the study revealed some factors affecting budgetary controls such as price fluctuations due to inflation which leads to increase in the cost of operation hence affecting the total cost of service delivery, limited knowledge about budgetary controls, changing business environments, unexpected expenditures and diminishing local currency against the US dollars which in turn affects the achievement of the set
Firms that are capable of run its operations efficaciously are capable of allocate greater sales for the corporation. That is achieved through reducing or reducing charges as a way to boom the amount and nice of products and provider presented by the firm. However, if a company has lesser profits they might have to find a way to fund their envisioned budget by means of borrowing and tax restructuring (Robinson and closing, 2009). That is why the price range is basically seemed because the control of expenditure. As the total amount of the annual expenditure; the corporation ought to not exceed the allocation of price