Question

Today, many companies face budgetary challenges on a continual basis. Two critical aspects that businesses lack are effective control practices and monitoring. Discuss the following in regard to this:

• What are some examples of effective control practices, and how do they help address budgetary challenges?
• What types of challenges could exist in monitoring and maintaining the controls?

Answer 1

some effective budgetary controls techniques are:

1. Performance management under budget: this is a technique which measures the past performance of the employees and based on that creates a schedule to do the future work. It effectively helps in monitoring and maintaining the performance of the worker.

2. Top management support:
The top management must see budget as an effective tool to improve the efficiency of the business instead of seeing it as an expense. The top management must ensure the flexibility of the controls from time to time depending upon the circumstances. Otherwise, there will be a mismatch between projected budget and actual results because of not taking into consideration the new circumstances.

3. The budget must be prepared by taking into consideration the ideas of all levels of Management including bottom level managers. That is the controls must ensure that preparation of the budget is not with a single level of management.
Because when the lower and middle management feel a sense of commitment to practice the budget as they were involved in making it.

Challenges in monitoring and maintaining controls.

1. The top management interest might dilute from time to time.
2. Communication issues: Not an effective communication channel between different levels of management.
3. New circumstances might change the entire controls. For example the acquisition of the present company by a new company.