What is budget control?

If there is a fundamental tool for a company, that is budget control. This is one of the economic terms most important that a businessman or an entrepreneur must have at hand when managing a business effectively.

Budgetary control is the set of ideas, actions and tools necessary to maintain the balance between expenses and income and to ensure that the accounts are settled. It is about controlling that the established budget is being met and carrying out the necessary measures to do so. In fact, budget is the essential element of budgetary control, from which you can calculate the possible expenses of the company during a certain period of time, or also known as exercise, as well as estimating the ingresos to be received.

In this way, thanks to budget control, we can anticipate possible problems that may arise and affect the budget, either due to an increase or decrease in expenses and income.

What is budget control for?

One of the necessary tasks to be able to carry out budget control correctly is the measurement over time and the recording of all the inflows and outflows of money. Only in this way can we apply the multiple uses of budget control, among which are:

  • The comparison between the initial objectives and the data obtained in practice, either during certain periods of time or drill.
  • More flexible decision-making thanks to the possibility of forecasting and modifying actions and remittances according to the circumstances of the budget.
  • A more effective measurement of decisions made on the budget.

What are the principles of budget control?

The functioning of budget control is based on a series of principles that help to plan and manage the resources of a company efficiently:

  • Forecasting principles: they are based on the possibility of forecasting, determining a monetary amount and establishing a series of objectives to be achieved, since only then can something be predicted.
  • Planning principles: these consist of:
    • specify the actions to be carried out
    • make the installation of budget control affordable
    • give flexibility to budgets to be able to have a margin before possible unpredictable changes and their consequences
    • maintain a unit in terms of a single budget and coordinate to implement it
    • trust the effectiveness of budget control
    • participate collectively in budget planning and control
    • close planning before the budget period begins to have a chance to meet the requirements
    • modify the accounting by work areas to be able to carry out general accounting without losing sight of the objectives
  • Organizational principles: there must be a clear order in the business organization and communication must be precise and in writing as far as possible
  • Management principles: the responsibility of each one must be assumed and not safeguarded by a person with authority, while coordination is the basis for budget control to work, giving priority to the general interest over the individual.
  • Control principles: raise awareness about costs and their influence on the company and establish a series of rules to achieve respect for budgetary control, as well as recognize successes or errors.

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