Clearly defines areas of responsibility.

Promotes coordination and communication.

Forces management to look ahead, to set out detailed plans for achieving the targets for each department, operation and (ideally) each manager, to anticipate and give the organisation purpose and direction.

Compels management to think about the future, which is probably the most important feature of a budgetary planning and control system.

There are a number of advantages to budgeting and budgetary control: ROI.ДЄdvantages of budgeting and budgetary control Where outputs are compared with the assets employed in producing them, i.e. Inter-departmental sales are often made using 'transfer prices'. Where performance is measured by the difference between revenues (outputs) and expenditure (inputs). Units where inputs are measured in monetary terms but outputs are not. Organisational units in which outputs are measured in monetary terms but are not directly compared to input costs. There are four types of responsibility centres:

These enable managers to monitor organisational functions.ДЄ responsibility centre can be defined as any functional unit headed by a manager who is responsible for the activities of that unit.

Any differences (variances) are made the responsibility of key individuals who can either exercise control action or revise the original budgets.Д«udgetary control and responsibility centres.

A control technique whereby actual results are compared with budgets.

It helps to co-ordinate the activities of the organisation.ДЄn example would be an advertising budget or sales force budget.

A formal statement of the financial resources set aside for carrying out specific activities in a given period of time.

Like all management tools, the chapter highlights the need for detailed information, if the technique is to be used to its fullest advantage. It then goes on to look at the detail of budget construction and the use to which budgets can be put. The chapter looks at the concept of responsibility centres, and the advantages and disadvantages of budgetary control. Of all business activities, budgeting is one of the most important and, therefore, requires detailed attention.

An appreciation of the uses of budgets.

An introduction to the methods for preparing budgets.

An overview of the advantages and disadvantages of budgeting.

An indication and explanation of the importance of budgetary control in marketing as a key marketing control technique.

'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'. Budgetary control is defined by the Institute of Cost and Management Accountants (CIMA) as:

This is because financial control was covered in detail in chapters one and two. This chapter concentrates on budgetary control only. There are two types of control, namely budgetary and financial.

Budget definition