Budgetary Control Tool - Coursework Example

Budgetary control Introduction A budget is one of the most important financial resource management tool in any organization. It refers to a numerical expression of planned activities in an organization over a specific period. This makes budgetary control an essential management tool that influences the control of performance in the organization thereby an important management tool in the organization. Budgetary control on the other hand refers to the process of measuring the actual performance of the specific individuals in the organization with the dictates of the budget. This way, the management determines variances and seeks accountability from the tasked individuals a process that improves efficiency in the work force in the organization (Lee, Ronald & Philip, 2013). This way, budgetary control helps the management monitor the functions at the organization as a more integrative control for organizations as discussed in the essay below. A budget is the most important financial document in every organization. The plan indicates all the resources in the organization and the expected plans of action. Among the essential contents of a budget, include costs, expenses, volumes, revenues, assets, liabilities, cash flows, and resources quantities among many others (Fargus, 2000). An extensive budget includes every detail of the organization and therefore outlines its future operations. Additionally, the filing process makes it possible for managers to compare the different budgets in the organization thereby comparing the performance and growth of the organization. Budgetary control is a mechanism of controlling the above stated elements in the organization. Through budgetary control, managers monitor the operations of the organization and seeks accountability from thee responsible individuals. As a performance-controlling tool, managers use budgetary control to investigate the movements of the above elements in a process in which they investigate variances and demand accountability from the individuals entrusted with the management of such elements in the organization. Budgetary control is therefore an efficient management tool that provides opportunity for the various personnel in the organization. A budget is an extensive document whose formulation requires the incorporation of every individual in the organization. The formulation of a budget requires the input of every individual involved in the production at the organization. The incorporation of everyone provides the organization to develop and all-inclusive workforce in which everyone is important and contributes to the daily operations at the organization. Such contribute to the development of a conducive working environment as the employees undertake various challenges and consult freely in order to determine the appropriate operational ways of solving the operational problems at the organization. In such an environment, employees stand to develop rapidly since they take responsibility and account personally for the resources. This does not only improve professionalism at the organization but also improves the profitability of the organization (Painter, 2012). The system promises increased operational efficiency in the organization, as stated earlier a budget is a plan of action often indicated the available resources and their planned utilizations. Additionally, the budget indicates the responsible individuals a feature that makes supervision easier. With such knowledge, the process of budgetary creation becomes an all-inclusive process with every individual in the organization inputting their roles and advising the budget committee on the resources they require to complete their tasks. After the creation of such a budget, the implementation of the budget becomes an efficient process since everyone undertakes specific responsibilities and utilizes the allocated resources. It also becomes paramount for such employees to maintain high levels of fidelity in the utilization of their resources in order to prevent unprecedented financial losses (Pradhan, 1996). Efficiency further arises in supervision. Supervision is a management role through which the management checks the functions at the organization. Budgetary control provides for an effective way of evaluating the performance of the employees at the organization. As stated earlier, budgetary control provides for a mechanism of comparing performance to the stated budgetary allocation. This makes investigations into the performance of the human resources at the organization easier. The managers simply check the budget and compare the details of the budget to the undertakings at the organization with the aim of determining variances. The mangers therefore take the responsible individuals to task of explaining the variances. The process proves more efficient and instils a sense of self-supervision in the organization thereby improving the efficiency of the organization. Employees work better with minimal supervision. In this case, they maintain fidelity to the budget in order to avoid variances (Tanzi & Schuknecht, 2000). Budgets are futuristic in nature; they are financial plans for the future activities in an organization. Budgets therefore make budgetary control as a management tool more futuristic. The management will always sit with their subordinates and prepare annual or semiannual budgets. This implies that after the preparation of a single budgetary document, the same sustains the operations of the organization for a specified period such as a year or a half a year. This compels the management to work with proceeds from the previous year and steer the organization into the future. A futuristic approach in management helps cushion the organization from any unprecedented financial shocks. The mangers project the revenue and set target which they strive to achieve. Additional tools they use to achieve such include goals, objectives and visions all of which reconcile the organizational functions to the profitability objectives of the organization. Thinking ahead is a positive approach to management. The technique compels the management to achieve particular goals within the year despite the various challenges within the set period. Budgetary control achieves this since it places the management in a precarious condition in which they take part in the process of budgetary formulation and must therefore work with the resources they assign their departmental activities (Wildavsky, 1980). Market factors vary depending on the prevailing economic factors, with this knowledge managers exercise caution in the process of formulating the budget in order to avert losses. Budget formulation requires specific considerations in order to sustain the operations of the organization. Each fiscal year presents different challenges owing to the fluctuating economic factors in the market, this compels managers to consider such using the previous years and project the future of the organization. This makes budgetary among the most realistic management tools. It does not only restrict the various departments to the particular resources but it also recognizes the fluctuating nature of the market. Additionally, budgetary control as a management tool used in the control of performance encourages coordination and communication within the organization.as discussed in the above paragraphs, budget creation is a consultative process that requires the incorporation of all the departments within the organization. This makes budgetary control an efficient tool of performance control since it promises to increase consultation and coordination among the employees. Departments will consult not only in the process of making the budget but also in its implementation. The consultation acts as a motivator in the workplace since employees provide their contributions in the budget formation process. Respective heads of department will provide their internal budgets in order to improve accountability in the respective department a feature that consequently increases efficiency in the organization. Consultations and coordination are equally important in the implementation of the budget. The plan provides the amount of resources allocated to every department and the responsible individuals. This compels such personalities to work coordinate their operations with their juniors, monitor the utilization of the allocated resources and report to the managers as they account for both the finances and time allocated to them. Budgetary control indicates the responsible individuals entrusted with the particular resources. This improves the sense of responsibility a feature that consequently increases operational efficiency. Budgetary control as a tool of performance control therefore provides employees with a conducive working environment, one that encourages innovation and increased accountability. Employees take more responsibility when working in environment with minimal supervision. With efficient budgets, the specific individuals undertake their duties with minimal supervision only accounting to their managers occasionally. This acts as a motivator o most employees who feel appreciated and entrusted by the organization. Additionally, the technique is an effective process of training leadership in the organization. The managers use such techniques to assess effective personalities and promoting such to greater position. Budgetary control will therefore not only motivate the employees but also increase their efficiency. A budget operates like a yardstick. As such, budgetary control provides an effective basis for performance appraisal. It provides for a mechanism of investigating and comparing performance and results to the expected results. At the beginning of every financial year when the organization unveils its budget, the budget indicates the amount of money allocated to every department and the responsible personalities in the respective departments (Müller, 2010). At the end of the year, the management carries out an audit of the performance of the department and commands accountability in a process that investigates the variants. The budget in such a case serves as a control for determining variations. Positive variations are encouraged while negative variations indicate a deeper operational problem. Both cases provide a conducive and effective platform for investigating the effects of market factors and their effects on the operations in the organization. The heads of the departments account for their operations. A case where the variations are realistic and originate from the prevalent market and economic factors, the organization gets an opportunity to study the nature of such prevalence and their effects thereby equipping themselves with the appropriate information that influence their future undertakings. As a performance tool, budgetary control provides the managers and the responsible individuals with an opportunity to take remedial actions as they observe variants in the performance of the organization. As a control, the budget provides the management with a present reminder of the anticipated outcomes. With this, they readily determine flaws in their operations and therefore convene for remedial actions in order to remedy such undesired outcomes. The tool provides managers with a real study of the operations of the organization. While it does not provide alternatives, it provides factual and realistic indications of undesirable outcomes thereby providing the managers with an opportunity to rectify their undertakings in order to rectify the variant where possible. Additionally, this provides the managers with an opportunity to study and monitor the outcomes of every undertaking they take in the organization. Such real time monitoring of the organization is result conscious and cushions the organization from incurring losses (Thomas, 2009). Budgetary control provides for a mechanism of allocating scarce resources to the most deserving departments. Furthermore, with the incorporation of every individual in the formulation of the budget, the process becomes easier since the managers have an appropriate understanding of the state of the organization. Additionally, the tool economizes of time that is among the key resources in an organization. The use of the exception principles saves on time since the management passes their responsibilities to their juniors among other pertinent employees in the organization. With the effective monitoring and training techniques, the employees accomplish such assignments appropriately thereby increasing efficiency at the organization. In retrospect, budgetary control is one of the most preferred tool of performance control since it presents various advantages and operational efficiency. The tool provides a real-time-monitoring tool for both the managers and the junior employees in the organization. Furthermore, the use of budgetary controls creates a conducive working environment for the employees who feel more appreciated at the organization. The mindset of the employee influences their productivity. With the tool, employees feel more appreciated and entrusted. They therefore take such opportunities to learn leadership and management roles besides the obvious motivation. This way, the organization benefits increased efficiency and sustained operations. Bibliography Fargus, P. (2000). Measuring and improving employee motivation. London: Financial Times Prentice Hall. Lee, R. D., Ronald, W. & Philip, G. (2013). Public Budgeting Systems, 9th Ed. Burlington, MA: Jones and Bartlett Learning. Müller, C. (2010). Employee motivation an incentives at Apple: Do incentives really help to motivate employees?. Norderstedt: GRIN Verlag. Painter, R. et all. (2012). Cases and Materials on Employment law, Oxford, Oxford University Press. Pradhan, S. (1996). Evaluating public spending: A framework for public expenditure reviews. Washington, DC. Tanzi, V., & Schuknecht, L. (2000). Public spending in the 20th century: A global perspective. Cambridge [u.a.: Cambridge Univ. Press. Thomas, K. W. (2009). Intrinsic motivation at work: What really drives employee engagement. San Francisco: Berrett-Koehler Publishers. Wildavsky, A. (1980). How to limit government spending. Berkeley: University of California Press. Read More