Making Budgetary Control Effective

Budgetary control can be made effective if an organization can ensure the following : 

(1) Setting appropriate standard : This is a key to successful budgeting. Many budgets fail for lack of such standards, and some upper-level managers hesitate to allow subordinates to submit budget plans for fear that they may have no logical basis for reviewing budget requests. 

(2) Ensuring top-management support : Budget  making  and administration must receive the whole-hearted support of top 'management. If top management supports budget making. requires departments and divisions to make and defend their budgets, and participate in this review, then budgets encourage alert management throughout the organisation.

(3) Participation by users in budget preparation : Besides the support of top management, the concerned managers at lower levels should also participate in its preparation. Real participation in budget preparation is necessary to ensure success. It may also prove worthwhile to give  department managers a reasonable degree of latitude in changing their budgets and in shifting funds, as long as they meet their total budgets.

(4) Providing information to managers about performance under budget : If budgetary control is to work well, managers nccd ready information about actual and forecast performance under budgets by their departments. Such information must be so designed as to show them how well they are doing.