A Study of “Budgetary Control System as a Tool of

Finance Control”
Need and Importance
Budgetary control is a strong tool of business is to maximise profits. The
management is therefore always trying to focus on the proper planning, effective
coordination and control in order to maximise profits. There are various managerial
tools and techniques useful for the management to plan and control business
operations. Budget is also used for the management to plan and control business
operations and it is widely used as a standard device of planning and control.

Budget provide as a valuable aid to management through planning, coordination

and control. It is a tool which measures the managerial performance of an
organization. It promotes good morale and generates harmony in the organization.
Also it promotes efficiency and facilities management by exceptions. It helps in
promoting a feeling of cost consciousness among the employees in the
organization.

On the other side, as a budget is based on estimates, it may or may not be true. It
is not substitute of management because, the efficiency and utility of the budgetary
system depends on the skill and experience of the management. It cannot be
executed automatically because continuous efforts are necessary for the execution
of the budget.

In case of the manufacturing organizations, the estimation about the future is very
important for the production activities as huge amount of costs are invested in the
same activity. Especially the medium scale manufacturing organizations have their
key customers & these customers are the large scale manufacturing organizations.
The medium scale engineering industries are numerous. These types of industries
manufacture their products as per the demands & requirements of the large scale
industries (key customers). The large scale & continuous demand (& supply) is
throughout the year. For this purpose, the production budget & budgetary control
on the same function becomes very essential.

Through learning the budgetary control system in the production division, the said
functional area can be studied in the lights of cost ascertainment & control,
activities & the actual performance.

Patil Surajkumar (MBA Finance)