Characteristics Of Budgetary Control

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Accordingly to (Flamholtz, Daz and Tsui , 1985), different department and individual have goal that are not congruent with the organization, therefore, it is needed to have a control system to change people behaviour toward achieving organization objective. In order to meet organisation objective, organisation need to have a plan, goal setting and result measurement as they are key aspect of integrated control mechanism. With this mechanism, individual or group are able to perform better because this mechanism gives a clearer picture on how to meet the organisation objective. Financial constraint can affect Organisation’s operation, thus it has to manage its financial resource properly to prevent bankruptcy ruins or distress (Otley, 2002).…show more content…
According to (Quail, 1997), Budgetary control is a method to implement plan , coordinating activities and delegating task down hierarchy without losing control. There are four characteristic of budgetary control being listed out according to (Quail,1997): 1. In budget, target based are used to anticipate sales which company needed to decide the activities that it need to undertake and also how to go on and when to do the activities. 2. Budget target integrate activities down the organization by breaking it down into division, department or individual. 3. Monitoring the performance against the target by individual, division or department enable a swift corrective action to be taken if the targets are not met. Thus this established control in the organisation. 4. Target can change if market demand changes in an ordered and timely way. In the first point, top management use budget to strategize and planning resource allocation. The second and third point is used by management to check and make sure employees are doing it correctly. Last point is used to communicate throughout the company to ensure everyone knows the corporate…show more content…
Budget Slack is created when manager negotiate for higher achievable target while managerial short term solution means focusing on short term solution to improve current performance but harmful in a long run. According to (Jack Welch, 2005), during his time in general electric, top management would hold yearly meeting with manager to discuss and set the budget. The top executives are rewarded with higher earning and significant growth in sales thus their target will be set high. The lower management are rewarded based on achieving target and missing the target must be avoided thus their agenda is to negotiate for highly achieve target with conservative forecast of growth. This situation shows that budget slack prevent the company achieving as a

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