Budgets - Introduction
Budgetary control is the process by which financial control is exercised within an organisation.
Budgets for income/revenue and expenditure are prepared in advance and then compared with actual performance to establish any variances.
Managers are responsible for controllable costs within their budgets and are required to take remedial action if the adverse variances arise and they are considered excessive.
There are many management uses for budgets. For example, budgets are used to:
- Control income and expenditure (the traditional use)
- Establish priorities and set targets in numerical terms
- Provide direction and co-ordination, so that business objectives can be turned into practical reality
- Assign responsibilities to budget holders (managers) and allocate resources
- Communicate targets from management to employees
- Motivate staff
- Improve efficiency
- Monitor performance
Whilst there are many uses of budgets, there are a set of guiding principles for good budgetary control in a business.
In an effective budget system:
- Managerial responsibilities are clearly defined – in particular the responsibility to adhere to their budgets
- Individual budgets lay down a plan of action
- Performance is monitored against the budget
- Corrective action is taken if results differ significantly from the budget
- Departures from budgets are permitted only after approval from senior management
- Unaccounted for variances are investigated
These intensive one-day exam coaching & revision workshops are designed to help AS Business students maximise their performance in the BUSS1 & BUSS2 exams later this term. Through a series of intensive sessions, we focus on and build techniques that enable students to meet the assessment objectives. The main focus on each session is BUSS2, but we'll also dip into key BUSS1 topics and develop effective exam technique proven to work for both exams.