Pre-requisites for effective budgetary control system, Financial Management

ORGANISATION FOR BUDGETARY CONTROL (or) PRE-REQUISITES FOR THE INTRODUCTION OF AN EFFECTIVE BUDGETARY CONTROL SYSTEM

1.   BUDGET CENTRE:  It is a section of the organization of an undertaking defined for the reason of budgetary control.

2. ORGANISATION CHART: A correctly drawn organizational chart shows the functional responsibilities of every member of management and make sure that she/he knows her / his position in the organization and his relationship with others.

3. BUDGET COMMITTEE: It includes all executives in charge of important functions and entrusted with the preparation and finalization of budgets for several centers and also for the whole company called Master budget. usually, the CEO of the company is the Chairman of the committee and executives in charge of main functions of the business are the members.

4.   BUDGET MANUAL:  It is a rulebook or document, which provides for instructions in framing the budgets. It is described as - 'a document which sets out the responsibilities of the persons busy in the routine of and the forms and records required for budgetary control'.

5.   BUDGET PERIOD: It is the period of a budget, which usually is one year.  It is the time period for which the budget is used and prepared.

6.   PRINCIPAL BUDGET FACTOR / KEY FACTOR /LIMITING FACTOR / GOVERNING FACTOR:  It refers to the factor which dominates the business operations and which acts as a barrier or impediment in accomplishing the wanted result specified in the company's budget.  It will limit the activities of an undertaking.  It generally refers to any factor, which is in short supply like demand, stock, etc.  To make sure that the functional budgets are reasonably fulfilled, the degree of the influence of this factor must be first assessed.

Posted Date: 10/15/2012 8:33:31 AM | Location : United States







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