Budgetary control – business looks to future & states what it wants to happen and to achieve, then decides how to get there. How does a department know that it’s performance is satisfactory. Targets set to allow business to know if objectives have been met. Results achieved compared to targets Continue Reading
03 – Management Control
Unit –
Budget Types
Budget Types Fixed budget Can be divided into different categories. Different planning approach to flexible budget. Based on fixed period of time & finding best way to achieve particular objective. e.g. Sales budget shows how sales targets will be met. Flexible budget Can change as business changes. Changing business conditions Continue Reading
Preparing a Budget
Starting point – identify key factor restricting organisations growth such as sales, human resources, physical space. All other activities determined by constraining factor.
The Benefits of Budgets
Various potential benefits of budgets & budgeting such as: coordinating business and service operations plan ahead – often reveals need for action which may have been otherwise forgotten learn – effective budgeting systems contain feedback loops motivating managers budgetary targets focus attention Performance judged against targets – must be achievable, Continue Reading
Process
Budgeting framework and standard costing framework are similar: plans set performance targets established outcome measures compared against targets corrective action taken if required Organisation should have corporate strategy, based on that: set of business/service strategies operational strategies business/service action plans Organisations within parts of public service which are not businesses Continue Reading
Target Setting
Important financial technique – setting goals & objectives. Managers use financial targets to monitor & assess success of financial control mechanisms. Typical targets deal with sales volumes & expenditure levels, achieved via budgeting techniques. Key principles around budgeting targets revolve around historical comparisons e.g. year-on-year. Able to determine operational trends Continue Reading