The Organizational Structure of the Business

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The involvement of operational staff in a budget setting will facilitate the budgetary control system and will eliminate variances. The operating staff well knows about the operating costs and thus should be involved in the budget setting. Involving staff in the budget set is not considered comfortable as it can cause a clash between departments but it can be quite helpful in smoother running operations. Budgets, which are kept secretive and made by the manager often, fail to implement. The staff often reacts severely against such budgets. It can lead to a feeling of mistrust and frustration. It can lead to misdirection and waste of resources. True integration is lacked in budgets in which staff is not involved. Ambiguous financial data should be converted into meaningful information. Operational staff must be educated about the budget and then involved in decision-making. The budget sets guidelines available for each segment. Controlling aspect of budget means to keep in check the controllable costs with budgeted costs. The responsibility for cost control is assigned to the manager of the cost department who is responsible for controlling the cost under his control. For controlling the cost accountant must use standard values. This involves creating inventory values for costing and controlling physical quantities and choosing such alternatives, which might increase revenue and decrease costs. It involves executing such budgets for operating under expected competitive and economic conditions. The budget should be set within an overall organizational planning and control framework.