What are the Steps involved in budgetary control?

Answer 1

Steps In Budgetary Control

The procedure to be followed in the preparation and control of budget may differ from business to

business. But, a general pattern of outline of budget preparation and control may go a long way

to achieve the end results. The steps are as follows:

Formulation of policies: The business policies are the foundation stone of budget construction.

Function policies should be formulated in advance. Longrange

policies with short term

projections should be made for the functional areas such as sales, production, inventory, cash

management, capital expenditure.

Preparation of forecasts: Based on the formulated policies, forecast should be made in respect

of each function. Activity based concepts should be introduced at the micro level for each

function Forecasts should not be considered as a mere estimates. Scientific methods should be adopted for forecasting. Analysis of various factors based on past, and present, future forecast

should be made.

Preparation of budgets: Forecasts are converted into written codified document. Such written

documents can be used for coordination purposes. Function budgets will act as guidelines for

implementation.

Forecast combinations: While developing the budgets, through a Master Budget various

permutations and combination processes are considered and developed. Based on this,

establishment of the most preferred one which will yield optimum benefits should be considered.

All the factor components should be identified which are likely to cause disturbances while

implementing the budgets

Azharuddin B K

MSRIT Bangalore