Objective:

This training article is intended to discuss

• The importance of budgetary control.
• The advantages and disadvantages of budgeting.
• Preparing budgets on a spreadsheet in Oracle Fusion Applications.

What is budgetary control :

By definition we can say that methodical control of an organization’s operations through establishment of standards and targets regarding income and expenditure, and a continuous monitoring and adjustment of performance against them. Hence we can say that:

• A control technique whereby actual results are compared with budgets.
• Any differences (variances) are made the responsibility of key individuals who can either exercise control action or revise the original budgets.

What is a Budget :

Budget is

• A formal statement of the financial resources set aside for carrying out specific activities in a given period of time.
• It helps to co-ordinate the activities of the organisation.

An example would be an advertising budget or sales force budget.

Advantages of Budgeting and budgetary control :

There are a number of advantages to budgeting and budgetary control:

• Compels management to think about the future, which is probably the most important feature of a budgetary planning and control system. 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.
• Promotes coordination and communication.
• Clearly defines areas of responsibility. Requires managers of budget centres to be made responsible for the achievement of budget targets for the operations under their personal control.
• Provides a basis for performance appraisal (variance analysis). A budget is basically a yardstick against which actual performance is measured and assessed. Control is provided by comparisons of actual results against budget plan. Departures from budget can then be investigated and the reasons for the differences can be divided into controllable and non-controllable factors.
• Enables remedial action to be taken as variances emerge.
• Motivates employees by participating in the setting of budgets.
• Improves the allocation of scarce resources.
• Economises management time by using the management by exception principle.

Having said that there are few genuine issues of budgeting and budgetary control :

• Budgets can be seen as pressure devices imposed by management, thus resulting in bad labour relations and inaccurate record-keeping.
• Departmental conflict arises due to disputes over resource allocation and departments blaming each other if targets are not attained.
• It is difficult to reconcile personal/individual and corporate goals.
• Waste may arise as managers adopt the view, "we had better spend it or we will lose it". This is often coupled with "empire building" in order to enhance the prestige of a department.
• Responsibility versus controlling, i.e. some costs are under the influence of more than one person, e.g. power costs.
• Managers may overestimate costs so that they will not be blamed in the future should they overspend.

Creating Budget on a Spreadsheet:

For creating budget we need have three basic inputs :: Account, Amount and Period.

Navigation- Goto to General Accounting Dashboard and select the data access set as shown below-

Click on Create Budgets in Spreadsheet. But before that we need to select the appropriate data access set for which the budget is to be created. The system will ask for login Id and password to download the spreadsheet. We will get the following window

Input Budget name, ledger and accounting period. Double click on the highlighted box to get the required account combination for stationary for marketing department

Select the valid code combinations for stationary account and click on OK and select the currency and approved budget amount and click on Submit.

Anjan Mukerji

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