Budgetary Control Essay

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Question: “Budgetary control is part of overall organization 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 organization”. Critically evaluate this claim, supporting your discussion with both theoretical arguments and practical examples. Budget is defined by the Oxford dictionary as an estimate of income and expenditure for a set period of time or the amount of money needed or available for a purpose. A budget provide the detailed plans for a business in the main areas such as purchases, sales (revenue), production, labor, trade receivables, and trade payables. Budget is also a method of financial planning for a business’s future. Budgetary control is described by Buckley and McKenna (1972) as consisting of planning, controlling, coordinating and motivation through money values and departments within an organisation. It is based on the provisions of the budget revenue and expenditure criteria, to check and supervise the activities of various departments to ensure that organizations achieve business objectives, and make expenditures subject to strict and effective process constraints (Xu Xiaoping and Sun Qingli 2010). Performance management is defined by Olsen (n.d.) as a process by which organizations align their resources, systems and employees to strategic objectives and priorities. In recent times, the use of budgetary control in performance management has taken on greater importance for organizations. The aim of this essay is to define and analyze the advantages and limitations of budgetary control, as well as discuss on what can be done to make budgetary control more effective. One of the advantages of budgetary control in today’s complex organizations is that it enables the

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