Benefits of Operating a Budgetary Control System
Planning and Control
Authorisation and Delegation
Evaluating Performance
Communication and Motivation
provides a planning framework by setting targets
coordinates various aspects of the business through the master budget and can be used as a point of referencetext
acts as a controlling device to correct any deviations
e.g. if a departmental manager is given a budget of £500 per month for specified supplier, he would be in a position to monitor and control the expenses for supplies
helps management learn from past experiences
can look at the success or failure in the past and isolate errors and analyse their cause to establish steps to be taken to avoid repeating these errors
it helps in the decision making process
forces managers to anticipate and forecast the trends and changes in the external environment
e.g. the airline industry must keep in mind the future changes in the price of fuel when allocating budgets
identifies those responsible, delegates responsibility, enables management by exception
managers must take responsibility for the budget process
comparison of actual results with budget
it can be used as a basis for measurement of managerial performance
it identifies trends and can be used as a means of bench marking
strategies and policies must be communicated to the manager involved, and it helps to develop a good system of communication upwards and downwards
Lower-level management are responsible for implementing the budgets and the plans and so proper communication at all levels reduces the risk of failure due to any misunderstanding
helps people see where the organisation is going and where they fit in the organisation