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Enterprise is a complex man-made running coupling system and a contractual association with body; it is very necessary to the business activities of its process and implements control. According to the modern management guru Robert Simon’s theory, management control achieve management objectives. Through the implementation of a series of management control lever, so it should increase the importance of budgetary control and devote energies to the management of budgetary control to ensure that business objectives and performance management of the smooth realization.
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The essay will first give an overview of budget control. Secondly, it will introduce the Performance Management Overview. Thirdly, it will discuss How to improve the effectiveness of budgetary control. Finally, it will give a short conclusion.
An overview of budget control
The meaning of budgetary control
Budgetary control has the existence of broad and narrow sense. Broad budgetary control sees the entire budget system as a control system, which it is the formation of a prior, during and after the whole process control system (David E.W. Marginsona, 1999). Through the budget preparation, budget evaluation, reward and punishment by monitoring of budget execution. Narrow budgetary control prepares a good budget as a basis for performance management and standards on a regular basis to compare actual performance with the budget analyze differences in the results and take corrective measures, which is mainly referring to something in the process of budget implementation in the monitoring of behavior.
According to control activities, budget control includes target control, process control and system control, while the budget as the primary means of corporate internal controls provides a comprehensive management platform. Budget target of control is that Budget management through strategic planning to determine the annual business objectives; then through the decomposition of indicators to clarify the responsibility of the objectives of the responsibility of the budget units as a basis for evaluation.
Budget program control is that Budget management achieves complete control over the purpose through the division of budget management decision-making authority and authorization controls, segregation of duties control is incompatible with the budget organization, budget, audit, budget monitoring and internal audit characteristics (John K. Christiansen and Peter Skærbæk, 1997). Budgetary control regulates businesses and people’s behavior through a series of system control and enhances enterprise “rule of law” capacity, at the same time improves the enterprise’s core competitiveness.
Budgetary control is the core of enterprise management control and a business management system, a very important control system. Budgetary control is a comprehensive system of budgetary control, That budgetary control infiltrates to the various business processes of enterprises. At the same time, it is still the core of internal control. Science and the implementation of budgetary control is an important guarantee for the effective implementation of budget management
The role and significance of budgetary control
Budgetary control mainly refers to the budget during the execution of the budget implementation of the routine supervision and control; it is the budget target to achieve the necessary guarantees. Control functions are the basic functions of management of the budget in the analysis of the implementation of enterprise budget management; Control effect of budget management throughout the management process.
Budgeting is a pre-budget control, budget execution is a matter of control, budget evaluation is a kind of ex post control. As the enterprise’s own internal and external conditions change, sometimes business strategy need to make corresponding adjustments, though corporate budget management must change in accordance with the strategic objectives of changes in the future management of operational activities to achieve feed forward control (Peter Brownell ,1985). In the budget execution process, from budget management, budgetary control organizations in the field and promptly discovered that the actual deviations from the budget differences, and took the necessary measures to eliminate weaknesses and achieve process control.
Budget management functions In the budget- feedback control, budget management, budget management and the implementation of the main functions keep the actual results to compare with budget targets in time, and deviations occur message to budget management and the main body so that adjust it timely to ensure the budget goals.
In short, the advance control focuses on the corporate budget management and budgeting. Things in the process control focuses on each link to control the implementation of a business, and afterwards , feedback control focuses on the feedback according to deviate from the budget target follow-up control of information. Because of the combination, only the budget to strengthen all-round management and control capabilities, it enables Enterprise’s strategic objectives to be refined to implement.
Budgetary control is not only a wide range of control, but also a full range of control; budget control must penetrate to the enterprise in all business processes and the business links, which is covering all business sectors and positions. On the one hand, the application of accounting measurement accounting methods reflect implementation of the budget process and oversight for accounting control and budget management for the basic values to provide the required information. On the other hand, in-depth into the origin of the value of management activities, the daily operations of specific business areas, such as procurement, production, sales and so on, to carry out management control. Enterprise Budget Management of the main needs of the accounting department and co-ordination between business units and communication account control and management control together.
Budget management involves many factors, the breadth of the decision of the board of directors and the boards of supervisors only grasp what is important in order to take into account the overall situation, but also decided to encourage the implementation of the budget, the main body of self-control is particularly necessary.
Performance Management Overview
Performance Management connotation
“Performance management” is developed on the basis of a management concept and management models in the traditional management ideas (David Otleya, 1999). Performance management objectives promote the responsible people accountable for results to achieve organizational behavior efficient; it could through the design of organizational activities and achieves the objective evaluation of the effects.
Compared with traditional management, performance management activities of the organization is advocating relaxation of process management and rules of control, the management focus from a rules-based accountability to performance-based accountability, the entire management process demonstrates the activities of the organization goals and achieve its objectives effectiveness concerns. We must establish a performance-based accountability, it is necessary for organizations and individuals to evaluate the performance of activities which result in the activities of the organization and individual performance evaluation.
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By designing a set of performance evaluation index system of scientific, it reflect the objectives of organizations and individuals to achieve results, and it provide a basis for incentive and restraint and the allocation of resources for managers Performance appraisal is an important technology tool for performance management that improve the efficiency and it is the key factors of organizational behavior, thus constitute the core content of performance management
An overview of Performance Budgeting
The performance management concepts for budget management practices produced a performance budgeting. According to the Ministry of Finance Budget Division of the definition of performance budgeting, performance budgeting is a goal-oriented budget, it is based on achievement of the government’s public sector objectives and it is in budget preparation, control and evaluation of a budget management model( Robert Dransfield,2000).
In contrast with the traditional budget management, performance budget, focuses the effectiveness of fiscal spending in the stresses, at the same time it advocated to give managers sufficient autonomy in budget management and reporting system through the public sector, public sector reporting system in the traditional budget system to inject a kinds of incentive and restraint mechanisms to effectively contribute the organizational goals.
In the performance budget management, budget expenditure performance evaluation as a management control tool, which is a core content in performance budget management. The so-called budget expenditure performance evaluation refers to the use of certain assessment methods, quantitative indicators and appraisal criteria and functions of the department to achieve its performance goals established by the realization of the extent, as well as to achieve this goal; the implementation of the budget was carried out by the results of a comprehensive assessment and evaluation.
The aim of the department of performance objectives is rational allocation of resources, optimizing effectiveness and efficiency of the use of budgetary funds through a comprehensive evaluation. Performance evaluation of scientific conclusions of the performance of expenditure is the key to the successful implementation of performance management. This relates to how to organize the implementation, how to choose the scope of evaluation, how to determine the performance objectives, performance indicators and evaluation methods and so on; in order to obtain one scientific conclusion question on public expenditure in the “economic”, “efficiency” and “effectiveness “of the Three.
From the definition of performance budgeting, performance budget has two core elements, one is performance evaluation to solve how to set up performance evaluation system of science to arrive at the performance of scientific information; second is performance information and budget integration to solve performance information (PI) how to combine of management and budget issues, which is how to combine the performance information and budget preparation, execution and reporting system in order to achieve the efficient budget management and the promotion of organizational performance improvement (Jack Diamond,2003). Both of these two aspects are interlinked and mutually distinction, which constitute a complete performance of the budget system.
How to improve the effectiveness of budgetary control
Sometimes, the implementation of the budget alone to assess a business operation in the period may be good or bad business lacks flexibility, and thus induce businesses to focus only on some short-term, and immediate interests, rather than from a long-term, strategic point of view thinking. Therefore, we should budget for the traditional appraisal methods to do some improvements and make control tools with some other combine, so as to achieve the optimum.
Drawing on balanced scorecard thinking
Balanced scorecard help us from the level of multi-dimensional performance of the integrated assessment managers, it both on the organization’s financial indicators for evaluation and the organization’s customers, internal operations, the learning and growth aspects of assessment.
Incentive and constraint mechanism to conduct innovation
Budgetary control get people to complete it, they have to take into account people’s behavior and psychological factors, so the incentive and restrictive mechanism in the budget management is most importance (Michel J. Lebasa, 1995). Enterprises should be based on objective circumstances to develop a series of truly value-creating linkages with the staff of the incentive and restraint mechanisms to fully and effectively mobilize the enthusiasm of staff performance and creativity, so that employees consciously enterprise business objectives into their own development to be achieved goals, and actively take the initiative to complete the business plan to develop a budget, so that the budget management companies could be more active and effective implementation.
Dynamic evaluation refers to the budget implementation process, the budget of the implementation of dynamic and tracking of evaluation of the budget in the implementation, the timely detection of the budget in the implementation of the problems found and processing and adjustment of the budget in time. Through dynamic evaluation, we can more timely control the budget management and ensure its effective implementation.
Some companies focus only on practical preparation of the budget and ignore the control of the budget implementation process. In fact, the control of budget management play a key role in the budget; if there is no budget control, the budget would be a mere formality lose control. Budget management control system is adopted by various government departments and budget implementation of the relevant series of internal control procedures and the adjustment mechanism, whose main function prevent errors and fraud to ensure the correct implementation of the budget, as well as the efficient realization of organizational goals. Budget management and budgetary control systems also known as the internal control system, which constitute a complete budget control system together with the budget and external control systems.
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