Planning the future in financial terms is budget. You define your income and expenses within the limits set by budget. This is a forecast about future consumptions as per the actual results.
Cost and management accountant takes into account the sensitivity of budget variables as per changing business, social and economic condition.
Through budget implementation, management of an organization standardizes its operation. Budgetary plan act as a controlling and measuring tool, as how far a department is successful in achieving the targeted results. It sets the basic to measure output in term of quantity and quality, a qualitative production will ensure less reject rate and sales returns, so enhancing the company`s results. Comparison of actual results with the targeted results, deviation/variance recorded and forwarded for management decision making, rewarding and improving the work force. Positive variance shows that results have been achieved as per the standard ensuring efficiency. Negative variance alarms about thing going “out of control” or “poorly” managed resources. It may also call for amendment in budgetary targets being not realistic.
At organizational level, budget is prepared by collecting summary of forecasted income and expenses as per each department. That will then be incorporated in overall budget. In order to achieve the budget successfully, Realistic, time bonded and responsibility-oriented approach is needed. After top management has finalized the budget, departmental target will be given to each department manager. He/she is accountable for every action affecting the actual performance of the team. In case of failure, reason may be need for manager training as well as team under him/her. Various factors affect the achievement of budget:
Lack of knowledge about operation
Poor infrastructure
More idle time of machines
Clashes between the manager and work force under his/her supervision
He may be made responsible but authority may be restricted to those not involved in the departmental work and deciding as per their own mind frame.
Unrealistic target may be set without considering the changing conditions
Time available may be too short or too long
Manager may have be given more than one tasks at a time
Issues in coordination with other inter-related departments
Organizational politics, lobbying and manipulation
An important milestone in achieving the success is giving freedom of decision making to those who are assigning with a responsibility. Top management trust and support will act a lubricant in motivating workers and departmental in charge.
Monthly follow up will ensure solution of problems on time. Arranging Group meeting in the supervision of a branch manager to analyze the exchange of information and future actions taken by all departmental managers. Presence of independent in charge will provide a space to all departmental managers to share their concerns which may affect budget.
Achievement of budget ensures organizational success eventually. If proper measures not taken into account at the time of budget preparation, results will be waste of time and efforts. Ideal budget has following attributes that will result in less negative variance:
Specific
Measurable
Achievable
Realistic
Time bounded
Please comments or share if you really like this wonderful article.
Achieving The Budget
Planning the future in financial terms is budget. You define your income and expenses within the limits set by budget. This is a forecast about future consumptions as per the actual results.
Cost and management accountant takes into account the sensitivity of budget variables as per changing business, social and economic condition.
Through budget implementation, management of an organization standardizes its operation. Budgetary plan act as a controlling and measuring tool, as how far a department is successful in achieving the targeted results. It sets the basic to measure output in term of quantity and quality, a qualitative production will ensure less reject rate and sales returns, so enhancing the company`s results. Comparison of actual results with the targeted results, deviation/variance recorded and forwarded for management decision making, rewarding and improving the work force. Positive variance shows that results have been achieved as per the standard ensuring efficiency. Negative variance alarms about thing going “out of control” or “poorly” managed resources. It may also call for amendment in budgetary targets being not realistic.
At organizational level, budget is prepared by collecting summary of forecasted income and expenses as per each department. That will then be incorporated in overall budget. In order to achieve the budget successfully, Realistic, time bonded and responsibility-oriented approach is needed. After top management has finalized the budget, departmental target will be given to each department manager. He/she is accountable for every action affecting the actual performance of the team. In case of failure, reason may be need for manager training as well as team under him/her. Various factors affect the achievement of budget:
An important milestone in achieving the success is giving freedom of decision making to those who are assigning with a responsibility. Top management trust and support will act a lubricant in motivating workers and departmental in charge.
Monthly follow up will ensure solution of problems on time. Arranging Group meeting in the supervision of a branch manager to analyze the exchange of information and future actions taken by all departmental managers. Presence of independent in charge will provide a space to all departmental managers to share their concerns which may affect budget.
Achievement of budget ensures organizational success eventually. If proper measures not taken into account at the time of budget preparation, results will be waste of time and efforts. Ideal budget has following attributes that will result in less negative variance:
Please comments or share if you really like this wonderful article.
Related posts
Risk Strategy within Insurance
16/05/2014
Is There a Role For Government Intervention ...
14/05/2014
Money Ideas that are 100% Workable
08/05/2014
To Eat or Shop: A Budgetary Dilemma
23/04/2014