Budgetary Control System
Conclusion:
BRAC Bank maintains their budgetary control system and sometimes they review the actual income and expenses compared to the budget on a monthly basis. Their budgetary control system assists in setting up the goals and efforts are made for its achievements. They update their budget year by year.
Types of Budget There are many different types of budget:
Master Budget
A master budget is an overall financial and operating plan for a forthcoming calendar or fiscal year. It is usually prepared annually or quarterly. The master budget is really a number of sub budgets tied together to summarize the planned activities of the business. The format of the master budget depends on the size and nature of the business.
Sales Budget Sales budget an estimate of future sales. The sales manager is responsible for the accuracy of the budget. Sales budget may prepare on basis of product, types of customers, salesman, locality etc. For the preparation of sales budget past sales, salesman estimates, plant capacity, raw materials, order in hand, seasonal fluctuation etc should be taken under consideration. It is used to create company sales goals.
Production Budget Production budget an estimate of the number of units that must be manufactured to meet the sales goals. The production budget also estimates the various costs involved with manufacturing those units, including labor and material. It is created by product oriented companies.
Cash Budget This budget is prepared to predict the inflow and outflow of cash during the budget period. In cash receipts consider cash sales, cash collections and other receipts. In cash payment considered cash payments, tax payable, dividend payable etc. A cash budget makes provisions for a minimum cash balance which will be available at all time.
Fixed Budget This is the rigid budget and it is drawn on the assumption that there will be no change in the budgeted time period. A fixed budget is helpful only when the actual level of activity is equal to budgeted level of activities.
Flexible Budget A flexible budget gives different budgeted costs for different levels of activities. This budget is applicable in where activity levels vary from period to period. Where the business is new and it is difficult to predict, where industry is influenced by change in fashion, where there are changes in sales.
Long term budget Long term budget are prepared for those organizations, which deal in regular product line. Here organizations are not supposed to change their proceedings in short time periods.
Short term budget Short term budget are prepared for small time periods which work for seasonal product line. Here product may change in near future.
Budgetary Control: Budgetary control is a control technique whereby actual results are compared with budgets. It relates to the establishment of budgets relating the responsibilities of budget holders the needs of a policy.
The budgetary control is a continuous process that helps in planning, coordination and controlling of business decisions. A budget is a means and budgetary control is the end-result. The budgetary control system assists an organization in setting up the goals and efforts are made for its achievements. It enables economies in the enterprise.
Budgetary control compels business administration to think about the future that is most likely the crucial characteristic of this system. It coerces management to look into future, to outline thorough plans for attaining the objectives for each department, operation and each manager, to predict and grant the organization purpose and direction
Budget:
Budget is a formal statement of the financial resources set aside for carrying out specific activities in a given period of time. It means an estimate of costs, revenues, and resources over a specified period, reflecting a reading of future financial conditions and goals.
One of the most important administrative tools, a budget serves also as a
(1) Plan of action for achieving quantified objectives,
(2) Standard for measuring performance, and
(3) Device for coping with foreseeable adverse situations.
Budget is a plan that outlines an organization's financial and operational goals. So a budget may be thought of as an action plan; planning a budget helps a business allocate resources, evaluate performance, and formulate plans.
While planning a budget can occur at any time, for many businesses, planning a budget is an annual task, where the past year's budget is reviewed.
Objectives of Budgetary Control System:
The main objectives of budgetary control are as follows:
- It coordinates the actions of various departments.
- Budgetary control helps in eliminating wastes and raises the profitability position of a business enterprise.
- It makes a prediction about capital expenditure for future.
- It helps in amending deviations from the established standards.
- It is essential for planning, controlling and also acts as an instrument of coordination.
- Budgetary control operates various cost centers and departments with efficiency and economy.
- It centralizes the control system.
Budgetary Control method: Like other organizations BRAC Bank also establishes and maintain budget. Budgetary control system help them planning, coordinating and controlling business decisions. A responsibility centre can be defined as any functional unit headed by a manager who is responsible for the activities of that unit. Budgetary control and responsibility centers enable managers to monitor organizational functions. There are four types of responsibility centre:
a) Revenue centre terms but are not directly compared to input costs.
b) Expense centre Units where inputs are measured in monetary terms but outputs are Organizational units in which outputs are measured in monetary not.
c) Profit centre Where performance is measured by the difference between revenues (outputs) and expenditure (inputs).
d) Investment centre Where outputs are compared with the assets employed in producing them.
BRAC Bank may apply the following characteristics in budget system:
a) Budget centre: A budget centre may encompass several cost centres. Units responsible for the preparation of budgets.
b) Budget committee: departmental heads and. Every part of the bank should be represented on the committee. This may consist of senior members of the bank, e.g. Functions of the budget committee include: Coordination of the preparation of budgets, including the issue of a manual
Issuing of timetables for preparation of budgets
Comparison of actual results with budget and investigation of variances.
Provision of information to assist budget preparations
c) Budget Officer: Controls the budget administration the job involves: liaising between the budget committee and managers responsible for budget preparation
dealing with budgetary control problems
educating people about budgetary control.
ensuring that deadlines are met
d) Budget manual: This document includes : charts the bank
clearly defines the responsibility of persons involved in the budgeting system.
contains account codes for items of expenditure and revenue
details the budget procedures
timetables the process
Budgetary control System of BRAC Bank Ltd:
Organization Profile:
BRAC Bank Limited is one of the leading private banks in Bangladesh. BRAC Bank has received the commercial banking license from Bangladesh Bank in 2001. The head office of the bank is situated at Gulshan, Dhaka. BRAC Bank operating its business in whole Bangladesh. BRAC Bank is expanding its branch network rapidly throughout the country. Since then it has established its name and branding with its quality of service and products. In a very short time BRAC Bank became one of the successful and fastest growing private banks in Bangladesh. BRAC Bank is owned partially by BRAC, the largest non-government organization in the world, International Finance Corporation (IFC), the private sector arm of The World Bank Group, and Shore Cap International.
Currently, BRAC Bank has 100 Branches, 60 SME Service Centers, 3 SME/Krishi Branches, more than 300 ATMs and 424 SME Unit offices across the country. Among them, BRAC Bank is well known for its SME Banking in Bangladesh. BRAC Bank provides all sort of banking service to the mass people of Bangladesh.
Budget preparation BRAC Bank firstly, This is also known as the key budget factor or limiting budget factor and is the factor which will limit the activities of an undertaking. This limits output, e.g. sales, material or labour. determines the principal budget factor.
a) Sales budget: In sales budget BRAC Bank consider: company's pricing policy, after sales service, credit terms offered. general economic and political conditions, changes in the population, competition, consumers' income and tastes, advertising and other sales promotion techniques,
b) Raw materials and purchasing budget: Raw materials and purchasing budget include: production requirements, planning stock levels, storage space, trends of material prices.
c) Production budget: In production budget include: subcontract, plan for overtime, introduce shift work, hire or buy additional machinery, the materials purchases budget's both quantitative and financial.
d) Labour budget: This budget includes: grades of employee required, salary rates, and the need for incentives. production requirements, man-hours available,
e) Cash budget: Cash budget summarizes monthly receipts and payments. Hence, it highlights monthly surpluses and deficits of actual cash. Its main uses are: Receipts of cash may come from one of the following: cash sales, payments by debtors, the sale of fixed assets, the issue of new shares, the receipt of interest and dividends from investments. to maintain cash requirements, to show the feasibility of management's plans in cash terms, to illustrate the financial impact of changes in management policy, e.g. change of credit terms offered to customers.
Payments of cash may be for one or more of the following: purchase of stocks, payments of salaries or other expenses, purchase of capital items, payment of interest, dividends or taxation.
Committee Review& Final Approval:
Board meeting held and budget proposal and programmatic and fundraising assumptions are presented for approval. Staff meeting held to discuss budget, program goals and time line for new years. After preparing the budget the budget committee meets to review budget draft and assumptions and make recommendations.
Conclusion:
BRAC Bank maintains their budgetary control system and sometimes they review the actual income and expenses compared to the budget on a monthly basis. Their budgetary control system assists in setting up the goals and efforts are made for its achievements. They update their budget year by year.
Types of Budget There are many different types of budget:
Master Budget
A master budget is an overall financial and operating plan for a forthcoming calendar or fiscal year. It is usually prepared annually or quarterly. The master budget is really a number of sub budgets tied together to summarize the planned activities of the business. The format of the master budget depends on the size and nature of the business.
Sales Budget Sales budget an estimate of future sales. The sales manager is responsible for the accuracy of the budget. Sales budget may prepare on basis of product, types of customers, salesman, locality etc. For the preparation of sales budget past sales, salesman estimates, plant capacity, raw materials, order in hand, seasonal fluctuation etc should be taken under consideration. It is used to create company sales goals.
Production Budget Production budget an estimate of the number of units that must be manufactured to meet the sales goals. The production budget also estimates the various costs involved with manufacturing those units, including labor and material. It is created by product oriented companies.
Cash Budget This budget is prepared to predict the inflow and outflow of cash during the budget period. In cash receipts consider cash sales, cash collections and other receipts. In cash payment considered cash payments, tax payable, dividend payable etc. A cash budget makes provisions for a minimum cash balance which will be available at all time.
Fixed Budget This is the rigid budget and it is drawn on the assumption that there will be no change in the budgeted time period. A fixed budget is helpful only when the actual level of activity is equal to budgeted level of activities.
Flexible Budget A flexible budget gives different budgeted costs for different levels of activities. This budget is applicable in where activity levels vary from period to period. Where the business is new and it is difficult to predict, where industry is influenced by change in fashion, where there are changes in sales.
Long term budget Long term budget are prepared for those organizations, which deal in regular product line. Here organizations are not supposed to change their proceedings in short time periods.
Short term budget Short term budget are prepared for small time periods which work for seasonal product line. Here product may change in near future.
Budgetary Control: Budgetary control is a control technique whereby actual results are compared with budgets. It relates to the establishment of budgets relating the responsibilities of budget holders the needs of a policy.
The budgetary control is a continuous process that helps in planning, coordination and controlling of business decisions. A budget is a means and budgetary control is the end-result. The budgetary control system assists an organization in setting up the goals and efforts are made for its achievements. It enables economies in the enterprise.
Budgetary control compels business administration to think about the future that is most likely the crucial characteristic of this system. It coerces management to look into future, to outline thorough plans for attaining the objectives for each department, operation and each manager, to predict and grant the organization purpose and direction
Budget:
Budget is a formal statement of the financial resources set aside for carrying out specific activities in a given period of time. It means an estimate of costs, revenues, and resources over a specified period, reflecting a reading of future financial conditions and goals.
One of the most important administrative tools, a budget serves also as a
(1) Plan of action for achieving quantified objectives,
(2) Standard for measuring performance, and
(3) Device for coping with foreseeable adverse situations.
Budget is a plan that outlines an organization's financial and operational goals. So a budget may be thought of as an action plan; planning a budget helps a business allocate resources, evaluate performance, and formulate plans.
While planning a budget can occur at any time, for many businesses, planning a budget is an annual task, where the past year's budget is reviewed.
Objectives of Budgetary Control System:
The main objectives of budgetary control are as follows:
- It coordinates the actions of various departments.
- Budgetary control helps in eliminating wastes and raises the profitability position of a business enterprise.
- It makes a prediction about capital expenditure for future.
- It helps in amending deviations from the established standards.
- It is essential for planning, controlling and also acts as an instrument of coordination.
- Budgetary control operates various cost centers and departments with efficiency and economy.
- It centralizes the control system.
Budgetary Control method: Like other organizations BRAC Bank also establishes and maintain budget. Budgetary control system help them planning, coordinating and controlling business decisions. A responsibility centre can be defined as any functional unit headed by a manager who is responsible for the activities of that unit. Budgetary control and responsibility centers enable managers to monitor organizational functions. There are four types of responsibility centre:
a) Revenue centre terms but are not directly compared to input costs.
b) Expense centre Units where inputs are measured in monetary terms but outputs are Organizational units in which outputs are measured in monetary not.
c) Profit centre Where performance is measured by the difference between revenues (outputs) and expenditure (inputs).
d) Investment centre Where outputs are compared with the assets employed in producing them.
BRAC Bank may apply the following characteristics in budget system:
a) Budget centre: A budget centre may encompass several cost centres. Units responsible for the preparation of budgets.
b) Budget committee: departmental heads and. Every part of the bank should be represented on the committee. This may consist of senior members of the bank, e.g. Functions of the budget committee include: Coordination of the preparation of budgets, including the issue of a manual
Issuing of timetables for preparation of budgets
Comparison of actual results with budget and investigation of variances.
Provision of information to assist budget preparations
c) Budget Officer: Controls the budget administration the job involves: liaising between the budget committee and managers responsible for budget preparation
dealing with budgetary control problems
educating people about budgetary control.
ensuring that deadlines are met
d) Budget manual: This document includes : charts the bank
clearly defines the responsibility of persons involved in the budgeting system.
contains account codes for items of expenditure and revenue
details the budget procedures
timetables the process
Budgetary control System of BRAC Bank Ltd:
Organization Profile:
BRAC Bank Limited is one of the leading private banks in Bangladesh. BRAC Bank has received the commercial banking license from Bangladesh Bank in 2001. The head office of the bank is situated at Gulshan, Dhaka. BRAC Bank operating its business in whole Bangladesh. BRAC Bank is expanding its branch network rapidly throughout the country. Since then it has established its name and branding with its quality of service and products. In a very short time BRAC Bank became one of the successful and fastest growing private banks in Bangladesh. BRAC Bank is owned partially by BRAC, the largest non-government organization in the world, International Finance Corporation (IFC), the private sector arm of The World Bank Group, and Shore Cap International.
Currently, BRAC Bank has 100 Branches, 60 SME Service Centers, 3 SME/Krishi Branches, more than 300 ATMs and 424 SME Unit offices across the country. Among them, BRAC Bank is well known for its SME Banking in Bangladesh. BRAC Bank provides all sort of banking service to the mass people of Bangladesh.
Budget preparation BRAC Bank firstly, This is also known as the key budget factor or limiting budget factor and is the factor which will limit the activities of an undertaking. This limits output, e.g. sales, material or labour. determines the principal budget factor.
a) Sales budget: In sales budget BRAC Bank consider: company's pricing policy, after sales service, credit terms offered. general economic and political conditions, changes in the population, competition, consumers' income and tastes, advertising and other sales promotion techniques,
b) Raw materials and purchasing budget: Raw materials and purchasing budget include: production requirements, planning stock levels, storage space, trends of material prices.
c) Production budget: In production budget include: subcontract, plan for overtime, introduce shift work, hire or buy additional machinery, the materials purchases budget's both quantitative and financial.
d) Labour budget: This budget includes: grades of employee required, salary rates, and the need for incentives. production requirements, man-hours available,
e) Cash budget: Cash budget summarizes monthly receipts and payments. Hence, it highlights monthly surpluses and deficits of actual cash. Its main uses are: Receipts of cash may come from one of the following: cash sales, payments by debtors, the sale of fixed assets, the issue of new shares, the receipt of interest and dividends from investments. to maintain cash requirements, to show the feasibility of management's plans in cash terms, to illustrate the financial impact of changes in management policy, e.g. change of credit terms offered to customers.
Payments of cash may be for one or more of the following: purchase of stocks, payments of salaries or other expenses, purchase of capital items, payment of interest, dividends or taxation.
Committee Review& Final Approval:
Board meeting held and budget proposal and programmatic and fundraising assumptions are presented for approval. Staff meeting held to discuss budget, program goals and time line for new years. After preparing the budget the budget committee meets to review budget draft and assumptions and make recommendations.
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