Project Management Techniques

Assignment 3

BUDGETARY CONTROL

Submitted by:
Susmitha. P
23261NC016
 What is a BUDGET?

Budget is an instrument is an instrument of

management used as an aide in

Planning Programming Business activity

The BUDGET is used for cost control purposes and it is one of the most
important activities employed by management.
The BUDGET represents the financial requirement of different sections of a
business during a period of time, to achieve an estimated profit on a given
volume of sales.

The BUDGET depends on past statistical data and predicts the estimated
labour, sales production and other management requirements for a definite
budgetary period.
Example:
A recreation BUDGET of a person for one fine evening may look as,
Cab charges to a mall – Rs. 250/-
Cinema ticket – Rs. 300/-
Dinner in a restaurant – Rs.500/-
Cab charges back home – Rs.300/-
Total Rs. 1350/-
The BUDGET is a statement showing the way the person plans to spend Rs.
What is BUDGETING?
BUDGETING is the art of BUDGET making.
BUDGETING plays an important role in development and use of modern cost
accounting systems in all types of business enterprises.
Good BUDGETING shows the manager what he may expect in sales I the
coming months.

It permits the formulation of production quota, including the types and

quantity of material, the number and kind of labours required, the amount of
overhead and fixed asset requirements, it points out financial requirement
needed, to accomplish the budget plan.
Thus BUDGETING implies forecasting and pre-planning for the BUDGET period
based upon the past statistical data and present conditions.
What are the requirements for an effective BUDGETING?
❖ There should be a recognised organization for BUDGETING with all lines of
authority and responsibility, definitely allocated and defined.
❖ The BUDGET should distinctly mark the responsibilities of each section of
the business.

❖ Since the BUDGET is based on estimates of sales and cost, they should take
good care to make the estimate.
❖ A BUDGET should be made flexible so that they may incorporate
unavoidable changes if necessary.
What is BUDGETARY CONTROL?
BUDGETARY CONTROL makes use of planning and controlling all aspects of
producing and selling products or service. It attempts to show the plans in
financial terms.
The BUDGETARY CONTROL when applied to a business as a whole or
different section within the business, it compares the actual performance
and the predicted performance.

And thus enables all levels of management and supervision to know how
their sections are moving towards the achievements of the BUDGETED
targets.
Thus BUDGETARY CONTROL attempts to bring the actual performance at par
with the predicted performance, by keeping a strict supervisory on the
actual performance and by exercising control if necessary.
Advantages of BUDGETING:
❖ Policy plans and actions are all reflected in the BUDGETARY CONTROL
system. There is a formal recognition of the targets which the business hope
to achieve.
❖ BUDGETING makes for a better understanding, coordination and harmony
of action in a business enterprise, because all the departments take part in
the process.

▪ The target goals and policies are clearly defined.

❖ It provides the management with a guide of daily activities thus helping in
determining the performance and efficiency of each department there by
leading to improvement.
❖ It informs the management of the progress made towards achieving the
predetermine objectives.
❖ Total capital required and the price of an item can be estimated in advance.
What are the limitations of BUDGETING?
Since the BUDGET is based on estimates, which means the estimated sales,
estimated costs, estimated business conditions etc., it may need periodic
revisions because estimates may not come to be cent per cent true.

A BUDGET cannot work , until the desire to make it work is established in the
minds of persons working in the different sections of a business concern.
❖ Budgetary control plays a critical role for a project by ensuring that projects
stay within their allocated financial resources. It involves monitoring and
managing project expenses, tracking budget variances, and making
adjustments as needed to keep the project on track financially.
❖ Essentially, budgetary control helps project managers maintain cost
efficiency, allocate resources effectively, and make informed decisions to
achieve project objectives within budget constraints.