Budgetary Control Process Essay Example

of each month, the company will hold a budget review meeting to evaluate each department's performance in comparison to the budgets. By analyzing normal and abnormal variations, the company will determine the reasons for discrepancies and take any necessary corrective actions to improve individual department's performance. The initiation of the budget process will be facilitated by the board of directors, who will establish broad policies based on expected sales and other assumptions in the next 12 months to create the budget. Furthermore, the company plans to establish a "budget committee."

The budget committee will be composed of the finance director as the representative from the board of directors, and other functional and departmental managers as members. The functional and departmental managers will use the overall policies set by the board to create an outline for the departmental budgets. The company anticipates several benefits from implementing this budgetary control process. First, there will be closer coordination between all departments, specifically between production and sales departments to ensure budget goals are met. Second, by planning ahead during the budgetary period, managers will take into account all necessary information to complete the process.

By enabling managers to plan ahead and consider all factors that may affect future performance, an effective budgetary system provides valuable feedback that allows them to learn from mistakes. Additionally, budgets establish realistic and motivating targets for managers to strive for. This ensures that they take their goals seriously and work diligently towards achieving them.

Effective communication is crucial for preparing and monitoring budgets, as well as achieving targets. This involves communication among managers at the same level and between managers and subordinates to gather necessary information.