Essays on Budgetary Planning and Control Case Study

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The paper 'Budgetary Planning and Control' is a wonderful example of a finance and accounting case study. Budgeting is the process of quantifying the plans of an entity in order to achieve its objectives within a certain specified period. The budget is normally used for performance evaluation, cost control, and future decision making. A business uses such a budget to evaluate the amount of money that is flowing into the business in a given period, and consider the best way to spend it among different categories of commitments. Incidentally, an entity normally designates a suitable amount of funds to capital expenditure, recurrent expenditure and other categories.

By keeping track of where and how money is spent, a business is less likely to overspend; and hence meeting the intended financial objectives (Hopwood, 2008). Budgetary Planning and Control may is short short-term monitoring and quantification of long-term strategic plans of the business. Strategic planning is the process of preparing strategic plans which identify the objectives of the organizations. A long-term corporate plan is implemented with the help of budgeting. Budgets may be prepared for functions, financial departments, or resource items.

Incidentally, some organizations refer to budgeting as a means of harmonizing the combined intelligence of the entire business into a plan of action (Collier & Ampomah, 2007). Budgeting helps the business coordinate its activities. The budgetary process requires that observable detailed budgets are developed to cover each department, function, or activity in the organization. This is only possible when the effort of one function’ s budget is associated with the budget of another function. Consequently, the harmonization of activities, departments, and functions is attained (Tyagi & Madhu, 2003). Budgeting is a strong communication tool for business purposes.

The whole budgeting process comprises of cooperation and discussion among all levels of management. Both horizontal and vertical communication is crucial to make certain appropriate coordination of activities. The strategic decisions are communicated down to the functional area, where they are required to get implemented (McQuaig et al, 2010). Control of expenditure is only possible if the budgeting plan is done, designating the specific amount that should be spent on a particular activity, function, or department. Budgetary control requires the business entity to compare the actual results with the budgeted results and reporting on any variances.

Budgets set a control measure, which helps to achieve the plans set within the established confines of expenditure (Tyagi & Madhu, 2003). Budgets may be seen as a negotiating process in which managers’ fight with each other for limited resources. Budges set objectives, which have to be attained. Where budgetary goals are firmly set, some individuals will be positively motivated towards achieving them. This contributes positively to the entire company, as it becomes more efficient and productive (Mittendorf, 2006). The budgetary process requires the organization of a business into responsibility and budget centers with apparent lines of tasks of each manager.

This reduces the replication of efforts. It is also by Budgetary Planning that long-standing strategies are put into action. Planning involves the identification of objectives to be achieved at a future predetermined time (Shields, 1997). Although the budget appears to be so useful in business planning. South-guys partnership Ltd should be very careful to avoid it's becoming counterproductive. The objectives which must be determined should be reasonable and attainable.

If unattainable targets are set, the managers’ strains to achieve them-but they rather cause loss of morale and the objectives are not met. For example, the estimated future cash inflows should be reasonable and realistic, to avoid a shortage of cash in the future (Tyagi & Madhu, 2003).

References

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Collier, M., & Ampomah, A. 2007. Management Accounting - Risk and Control Strategy. Oxford: Butterworth-Heinemann.

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