“Budgetary Control Is Part of Overall Organisation Control and Is Concerned Primarily with the Control of Performance. the Use of Budgetary Control in Performance Management Has of Late Taken on Greater Importance

Budgetary Control Definition

The financial resources in a formal statement allocated for particular activities in a company in a stipulated time frame of usually 3, 6 or 12 months is known as a budget. Budgetary control is the comparison between budgets with actual operational results and one of the major aspects of management control would be budgetary control. Llewellyn (Ryan, 2007) speaks of accountability as a rather recent phenomenon and that the process of the budgetary control acts as not only a resources allocation platform, but also one that allocates responsibility as well. However, he strongly argues that these accountabilities cannot be invoked unless responsibilities have been assigned. (Business Dictionary, n.d.)

The Budgetary Control was defined by the Institute of Cost and Management Accountants as “The establishment of budgets relating the responsibilities of executives to the requirements of a policy, and the continuous comparison of actual with budgeted results, either to secure by individual action the objective of that policy, or to provide a basis for its revision”. (Chapter 4 - Budgetary Control)

Disadvantages of Budgetary Control and Budget

Although budgets may be an essential part of any marketing activity, disadvantages are inevitable. Budgets can be seen as pressure devices imposed by upper management in an organisation. Budgets may result in departmental conflicts due to disputes over resource allocation. In an organisation, it is also difficult to reconcile personal and incorporate goals. Managers would also tend to inflate estimated costs for the year as they would not be blamed if there is any overspend as the financial year would sometimes be unpredictable.

However, the ultimate disadvantage would be that there would be additional wastage in the company as managers might adopt the perception of the mandated expenditure to hit budgets by the end of the fiscal setting or they might face a cut in budget on the following fiscal...