Pre-requisites for establishing Budgetary Control System

Pre-requisites for establishing Budgetary Control System

Budgetary control refers to how well managers utilize budgets to monitor and control costs and operations in a given accounting period.

Following are the pre-requisites to implement Budgetary Control:

First, a Budget Centre which is that section of the organization for which the budget will be prepared should be clearly defined.

Budget Period or the time period for which the budget will be prepared and operated should be decided carefully. It should neither be too long nor too short.

An efficient and proper system of accounting should be established so that the information required for the proper implementation of the budgetary control can be available on time.

A proper organizational chart should be prepared properly, clearly depicting the responsibilities and duties of each level of executive.

A budget manual, an important document in relation to the budgetary control. It should be well written, indexed, and divided into sections. It should include the principles and objectives of budgetary control, duties, and responsibilities of each executive in the organization, accounts codes, budget diagrams, etc.

A budget key factor should be assessed before preparing other functional budgets to ensure that other functional budgets are capable of fulfillment.