research paper on budget and budgetary control

Budget and Budgetary Control: Key to Planning and Control in Public Sector

Posted: 22 Apr 2019

Nkechi Emeka-Nwokeji

Independent

Date Written: September 5, 2009

With the increasing wave of uncertainties, socio-political instabilities and ever changing conditions of business environment, organizations are bound to realize the integrity and rationality of a budget which must be upheld at all cost possible to avoid failure in Planning. The ultimate survival of organizations is dictated by how proficiently funds are acquired and managed. Such issues as whether necessary resources are being wasted, how can available resources be more efficiently used are just a few of the many questions answered by Budget and Budgetary control. Thus, it is the purpose of this paper to examine Budget and Budgetary control as a device designed by Management to ensure the efficient use of resources. Particular emphasis is on Budget and Budgetary control as a key to planning and control in Public Sector. In examining the issue, the general matter of study is introduced alongside with the statement of purpose and significance of the work. The concept and objective of Budget and Budgetary control and Public Sector are highlighted. Furthermore, the paper went ahead to analyze Budget and Budgetary control as a key to planning in Public Sector, the importance of active participation to ensure effective budget and other conditions that must exist for Budget to be effective. Finally, suggestions were proffered and conclusion drawn.

Keywords: Budgetary Control, Planning and Control

Suggested Citation: Suggested Citation

Nkechi Emeka-Nwokeji (Contact Author)

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Please note you do not have access to teaching notes, an assessment of budgeting and budgetary controls among small and medium-sized enterprises: evidence from a developing economy.

Journal of Accounting in Emerging Economies

ISSN : 2042-1168

Article publication date: 31 March 2021

Issue publication date: 23 July 2021

The capacity to plan, manage and control small and medium-sized enterprises (SMEs) is critical to realising their organisational goals. This paper assesses the effectiveness and perception of budgeting and budgetary control systems among SMEs.

Design/methodology/approach

Relying on the goal-setting theory (GST) and a methodology that accommodates questionnaires, data were collected from 170 manufacturing SMEs located in Cape Town, South Africa.

Research results affirm that the deployment of budgeting benefits from a positive perception of the value of budgeting and budgetary controls by key SME stakeholders. The study also finds that the perception of budgeting mirrors the level of education of SME operators, as educated respondents understand the value of implementing robust budgeting systems. Despite its focus on manufacturing SMEs, this study suggests that the manufacturing budget is the least utilised budgeting system among these organisations.

Practical implications

The study reinforces the communication power of budgeting and budgetary controls as SMEs and economic agents are not only aware of corporate objectives but are equally incentivised to support the attainment of these objectives.

Originality/value

Despite the extensive application of GST among scholars, its use in budgeting and budgetary control literature, particularly among SMEs in developing contexts, is limited. In line with GST, this study indicates that when agents establish and implement a plan, they are motivated to pursue and realise the set expectations while consistently evaluating themselves for improvement opportunities.

• Budgetary control
• Goal-setting theory
• Manufacturing sector

Matsoso, M.L. , Nyathi, M. and Nakpodia, F.A. (2021), "An assessment of budgeting and budgetary controls among small and medium-sized enterprises: evidence from a developing economy", Journal of Accounting in Emerging Economies , Vol. 11 No. 4, pp. 552-577. https://doi.org/10.1108/JAEE-04-2020-0082

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Budget and Budgetary Control

Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on March 30, 2023

Fact Checked

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Table of Contents

Modern business is marked by instability and uncertainty. Due to competition, government policies, new regulations, new production techniques, and changing consumer behavior, businesses must adapt to survive.

Due to these issues, all organizations have started to use budgetary techniques. The technique of budgetary control is used to compare actual expenditures and budgeted expenditures, as well as to analyze and correct variations.

Budget and Budgetary Control: Definitions

A budget is a financial plan for a corporation that covers a specific future period. It is an expression of income and expenditures over a certain period. Budgets are plans that cover all functional areas of a business for a specific future period.

A budget is a system that is related to plan and control. Therefore, budgets also include budgetary control.

In a nutshell, a budget is concerned with policy framing whereas control is the budgetary implementation of the policy.

In a narrow sense, budgetary control is a cost control technique wherein actual cost is compared to budgeted cost, and thus is aimed at profit .

Definitions

The main definitions of the budget are summarized as follows:

Brown and Howard: "The budget is a predetermined statement of management policy during a given period which provides a standard for comparison with the results actually achieved."

George R. Terry: "A budget is an estimate of future needs arranged according to an orderly basis covering some or all the activities of an enterprise for a definite period of time."

Harry L. Wyllie: "Budgets are finished products...They are formal programs of future operations and expected results. Budgets result from forward thinking and planning."

Sanders: "The essence of a budget is a detailed plan of operations for some specific future period, followed by a system of records which serves as a check upon plan."

H. J. Weldon: "A budget is thus a standard with which to measure the actual achievement of people, departments, etc."

Hemass C. Heiser: "A budget is an overall blueprint of a comprehensive plan of operations and actions expressed in financial terms."

Budgetary Control

Budgetary control does not merely involve the matching of estimated expenses to actual expenses . In addition, it involves placing responsibility for failures.

The periodic checking up of income, costs, and expenses related to the administration of the budget is known as budgetary control.

Objectives, Importance, and Functions of Budgetary Control

The main objectives of budgetary control are as follows:

1. Production efficiency. Budgetary control is a technique marked by advanced planning for the effective use of materials. Thus, it leads to smooth production chains.

2. Success of costing records. Budgetary control improves the utility of cost accounts, which provides knowledge about future costs . Hence, cost variations can be minimized.

3. Future planning. Every producer plans a definite output for a specific period for which it is possible to use budgets to estimate the required amount of finance, materials, labor, and other expenditures.

4. Cost control. Budgetary control is useful for cost control because the production process rotates around predetermined targets. Here, actual costs are compared to budgeted costs, and any variations are corrected by the management.

5. Helpful in policy framing. Budgeting provides a tool through which basic policies are periodically examined, restated, and established as guidelines for the entire organization.

6. Budgets are solutions to basic problems. Budgeting obliges management to make an early study of its basic problems. It is useful in making rational decisions.

7. Control on income and expenditure. In modern times budgeting is used to direct capital and energy into the most profitable channels. Every producer classifies expenditures, and fixed expenses and variable expenses are useful to learn the break-even points for output and sales .

8. Knowledge of required capital. Budgetary control provides information about the amount of capital required for the smooth running of the organization.

9. Knowledge of potential for expansion. Every business leader aims to expand their business. Budgetary control provides helpful information about how much extra capital, labor, and risk will be needed for expansion efforts.

10. Administrative usefulness. Budgetary control is the eye of the managerial staff. No other form of management control reveals weaknesses in an organization as quickly as the orderly procedure needed for systematic budgeting.

11. Helpful to the nation. When proper budgeting is undertaken in nearly every enterprise, it can bolster the national economy by providing stable employment, economical use of tools, and effective prevention of waste.

Budget and Budgetary Control FAQs

How is budgetary control used to direct capital and energy into the most profitable channels.

Budgetary control helps to direct capital and energy into the most profitable channels by classifying expenditure and fixed expenses and variable expenses. This allows businesses to learn the break-even points for output and sales.

What is a budget?

What is a budgetary control.

Budgetary control does not merely involve the matching of estimated expenses to actual expenses. In addition, it involves placing responsibility for failures. The periodic checking up of income, costs, and expenses related to the administration of the budget is known as budgetary control.

What are the objectives of budgetary control?

The main objectives of budgetary control are as follows: production efficiency, success of costing records, future planning, cost control, helpful in policy framing, budgets are solutions to basic problems, control on income and expenditure, knowledge of required capital, knowledge of potential for expansion, administrative usefulnessand helpful to the nation.

What are the benefits of budgetary control?

Some of the benefits of budgetary control include cost minimization, early study of basic problems and their solutions, timely detection of weaknesses in an organization, and bolster the national economy.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .

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Budgets and Budgetary Control

2016, Journal of Business Management & Social Sciences Research (JBM&SSR)

This study deals with budget, budgeting and budgetary control. Also pros and cons of budgetary control, steps of preparing budget and finally different types of budgets are discussed.

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