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Archives of Business Research – Vol. 8, No. 8

Publication Date: August 25, 2020

DOI: 10.14738/abr.88.8908.

Cudjoe, K. F. (2020). Budgeting And Budgetary Control Are Time Consuming Tasks For Any Organization: Examination Of How The

Preparation, Operation And Implementation Phases Are Carried Out To The Benefit And Achievement Of A Successful Organization.

Archives of Business Research, 8(8). 281-293.

Budgeting and Budgetary Control Are Time Consuming Tasks for

Any Organization: Examination of How The Preparation, Operation

And Implementation Phases Are Carried Out To The Benefit And

Achievement Of A Successful Organization

Dr. Francis Kwadade Cudjoe

FBCS, FIMIS, PhD, MBA, BSc (Hons)

Senior Lecturer, Knutsford University College

Adjunct Lecturer, GIMPA Business School, Accra, Ghana.

ABSTRACT

Budgeting and Budgeting Control are tasks that every organization has

to undertake to successfully manage the operation of the entity. These

tasks are very important organizational activities which need time to

prepare, operationalize and implement successfully. It is the objective

of every organization to be successful by achieving its goals and attain

competitive advantage. With the proper contribution from

management, the organization should be able to arrive at an acceptable

budget, which would enable the operational managers to monitor and

control their spending for organizational success. In this situation, the

managers’ acumen would be called upon to direct operational /

functional activities within the organization so that every member

would contribute his / her quota, to the execution of the budget. Once

the implementation is successful and furthermore exhuming benefits,

there is hope that the entire gamut of the organization would revel in

its achievement for higher productivity. A successful organization is

surely the cynosure of every director of the board!

Keywords: Budgeting, Budgeting Control, Accounting, Operation,

Implementation and Organization.

INTRODUCTION

Budget is a plan of action expressed in financial terms for an entity for a specific period (Berry &

Jarvis, 2005; Accmana3d.tripod.com, 2020; Hornby, 2001). Budgeting is the preparation /

provision of a quantitative statement, that forecasts future transactions, activities and events in

financial and non-financial terms for a defined period of time, which may include planned revenues,

expenses, assets, liabilities and cash flows (Mymoneycoach, 2020; Kotler, 2003).

Budgeting takes place in both public and private sector businesses (large, medium and small), non- governmental organisations (including charities), families and individual lives. Budgeting is one of

the functions of any business.

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URL: http://dx.doi.org/10.14738/abr.88.8908 282

Cudjoe, K. F. (2020). Budgeting And Budgetary Control Are Time Consuming Tasks For Any Organization: Examination Of How The Preparation,

Operation And Implementation Phases Are Carried Out To The Benefit And Achievement Of A Successful Organization. Archives of Business Research,

8(8). 281-293.

Kotler (2003) explains business as an entity, with synthesis of activities, that invests money in

resources (for example, buying buildings and machinery and, paying employees) in order to make

even more money for its owners. Furthermore, Hornby (2001) describes business as the activity

of creating, buying, selling or supplying goods and services for money. Bannister (1995) adds that

all businesses must be managed, no matter what their size or complexity, and that the common

denominator of business is money. From the foregoing, it is therefore, a fact that business is about

generating money through the activities being carried out.

The functional unit within the business that prepares and manages budgeting is Accounting, and

its function is essential to the running of the financial facet of the business. Before operations can

commence, money must be used to purchase the needed resources of production and marketing of

the products. According to Thukaram (2007), some form of record keeping is therefore, essential

for all businesses once operations are under-way, even if only for the purposes of taxation.

As the business grows and more problems arise, it would be realized that keeping accurate

information about the costs, prices, purchases and assets bought and sold, is very important. There

is therefore, the need for setting up a good administrative system for the two (2) different types of

accounting, i.e. Finance and Cost / Management sections, within the Accounting department of the

organization (Thukaram, 2007).

Budgetary control is the end result of budgeting; it happens when the organization is determining

various actual results with budgeted figures for the period under examination, and then the

standard set for comparing the budgeted figures against the actual performance to enable the

calculation of variances, if any (Accmana3d.tripod.com, 2020).

Practically, budgetary control is basically the comparison of budgeted values with actual results

during a control period (monthly / quarterly). After the approval of the master budget by the

organization, the Accounting department (the Cost / Management section), commences the

budgetary control process. Variances are calculated to identify the differences between actual and

budgeted values. These differences (highlighted in Budgetary Control Reports) are sent to

management for appropriate corrective action to be identified and carried out. Simultaneously,

management is also timely alerted of variances beyond the range set by it (exception reporting),

for investigation into the activities of such cost centres / departments (Accmana3d.tripod.com,

2020).

PURPOSES OF BUDGETING

According to Accmana3d.tripod.com (2020), there are five (5) main purposes of budgeting. These

are to:

• communicate,

• co-ordinate,

• plan,

• control, and

• evaluate.

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Archives of Business Research (ABR) Vol.8, Issue 8, August-2020

Communication

Managers in all departments of the organization have to justify the resources they need to achieve

their goals. They have to discuss with, and clarify to their superiors the scope and volume of their

activities as well as how their tasks would be performed. The communication between superiors

and subordinates helps affirm their mutual commitment to company goals. In addition, different

departments and units must communicate with each other during the budget process to coordinate

their plans, efforts and targets to the managers responsible for achieving them

(Accmana3d.tripod.com, 2020; Berry & Jarvis, 2005).

Co-ordination

Different units in the company must also coordinate the many different tasks they perform, toward

the achievement of a single plan. For example, the number and types of products and services to

be marketed must be coordinated with the purchasing and manufacturing departments to ensure

goods and services are available. This would ensure that, for example, the equipment needed for

production has been purchased and installed, and marketing programmes and advertising

promotions are planned and implemented (accmana3d.tripod.com, 2020; Berry & Jarvis, 2005).

Planning

A budget is ultimately the plan of activities in financial terms for the operations of an organization,

for a specific period of time. Many decisions are involved, and many questions must be answered.

Managers decide the most effective ways to accomplish each task; for example, when a particular

activity should be performed and how to go about it, and what resources are available and whether

there would be the need for additional resources (Accmana3d.tripod.com, 2020; Berry & Jarvis,

2005).

Controlling

Once the budget is finalized, it becomes the plan for the operations of the organization. Managers

have the authority to spend within the budget and responsibility to achieve revenues specified

within the budget. Budgets and the actual revenues, and expenditure are monitored continually for

variations, to determine whether the entity is on target. If performance does not meet the budget,

action should be taken immediately to adjust activities. It is important to note that, without

constant monitoring, an entity would not be able to realize when it is off target, so that the

necessary adjustments would be immediately carried out (Accmana3d.tripod.com, 2020; Berry &

Jarvis, 2005).

Evaluation

In the budgeting process, managers in every department should justify the resources they need to

achieve their goals. This is done through evaluating the manager’s performance. There are many

ways to evaluate a manager, however one way is to compare the budget against the actual

performance. In evaluation, it could be checked whether the manager was able to reach the target

revenue within the constraints of the targeted expenditure, notwithstanding the external factors

and constraints. For a manager, to achieve his / her target goals is an important aspect of a

managerial responsibility (Accmana3d.tripod.com, 2020; Berry & Jarvis, 2005).

TYPES OF SECTOR BUDGETING

There are basically two (2) types of sector budgeting. These are: