Budgetary control is the process of ascertaining several budgeted figures for the future of a business enterprise and then making comparison of these budgeted figures with the actual results for finding out discrepancies, if any. The comparison of budgeted and actual figures will allow the management to take curative actions at a proper time.

Budgetary control can be defined as, “A means of achieving the financial control of an entity whereby the actual results for a defined period of time are compared with the budgeted results, any differences (or variances) being noted, and some corrective action taken to bring the actual activities back into line with the budgeted ones if such variances need to be dealt with.”

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. The main objectives of budgetary control are as follows:

Proper maintenance of finance is very essential for the success of a business enterprise. After starting a business firm, it is your duty to map and supervise its financial position. Budgeting is the most efficient tool, which keeps your business and its finances at right path.

A budget is a statement of expected results expressed in numerical terms. It is prepared in advance for the particular period to which it applies. It is an instrument of planning as well as control. It controls your finances for achieving present and future objectives.

Budgeting can be defined as, “Budgeting is the process of predicting and controlling the spending of money within the organization and consists of a periodic negotiation cycle to set budgets (usually annual) and the day-to-day monitoring of current budgets.”

A budget delineates your future spending and the way to finance that spending. Budget serves as a standard against which actual performance can be compared. It is prepared for definite period of time into the future and it expresses everything in precise numerical terms. Budgets elucidate programmes and determine the steps to be taken to achieve goal. The main features of a budget are as follows:

The term ‘fixed capital’ is often considered to be equivalent to fixed assets, which represents the employment of capital in permanent assets and other non-current assets. The fixed assets are assets of enduring nature that the business does not aim to dispose of, or that could not be discarded of without interfering the business actions. Thus a company holds the fixed assets with the intention of making profits directly or indirectly and not for the purpose of sale in the ordinary course of business. The fixed assets include land, building, plant, machinery, furniture, fixtures, vehicles etc.

Making investment in the fixed capital is the primary step for setting up a business enterprise. The investment in non-current assets is termed as ‘fixed capital.’ Such assets include items in which capital is locked for a long time. Although they do not show the investment in physical productive facilities, yet they are essential for the success of the business and regarded as vital part of the capital arrangement.

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Capital Budgeting is a process of making investment decisions in capital expenditures. It is an expenditure the benefits of which are likely to be received over a period of time exceeding one year. Capital Budgeting decisions are very important to every organization. Any fallacious investment decision may prove to be lethal for the survival of the business concern.

It is also known as the expenditure incurred for acquiring or improving the fixed assets, the benefits of which are expected to be received over a number of years in future. The basic aim of capital budgeting is to allocate the available funds to a variety of proposals. The essential factor that regulates the capital budgeting decisions is the success of the approaching investment.

Capital budgeting means, “The process of preparing a plan for the raising of capital funds and for their deployment. For an incorporated business, funds may be obtained from a wide variety of sources. Chiefs amongst these are issues of ordinary shares or preference shares and of loan capital.”

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The working capital is the life-blood and nerve centre of a business firm. The sufficiency of working capital assists in raising credit standing of a business because of better terms on goods bought, lesser cost of manufacturing due to the acceptance of cash discounts, favorable rates of interest etc.

No business can run effectively without a sufficient quantity of working capital. It is crucial to retain right level of working capital. Finance manager is required to decide the amount of accurate working capital.

A business enterprise with ample working capital is always in a position to avail advantages of any favorable opportunity either to buy raw materials or to implement a special order or to wait for enhanced market status.

Cash is needed to carry out day-to-day workings and buy inventories etc. The shortage of cash may badly affect the position of a business concern. The receivables management is related to the volume of production and sales. For escalating sales there may be a need to offer additional credit facilities. While sales may ascend but the danger of bad debts and cost involved in it may have to be considered against the benefits.

The internal financing is a technique under which all profits of a company are not distributed amongst the shareholders as dividend, but a part of the profit is re-invested in the company. This process of retaining profits year after year and their utilization in the business is also known as ‘ploughing back of profits.’

These retained earnings are used in future for funding innovation and growth programmes and for fulfilling the fixed or working capital needs of the company. Since it means dependence on inner resources to meet up the fiscal requirements of the company.

It is basically a frugal step that a company takes, in the sense that instead of dispersing the total profits by way of dividends, it keeps a certain portion of it to be re-introduced into the business enterprise for its expansion. This is also known as ‘self-financing’ or ‘inter financing.’

This is considered as an idyllic technique of financial growth strategies because there is no instant pressure to pay any return on this portion of stockholders’ equity. It is an adjunct of sound financial management. It creates no lawful formalities as make borrowing either from the public or from the banks. The strategy of internal financing is the best method of financing the projects of recognized businesses without troubling their capital structure.

Financial plan is a statement estimating the amount of capital and determining its composition. The quantum of funds needed, will depend upon the assets requirements of the business. The time at which funds will be needed should be carefully decided so that finances are raised at a time when these are needed.

The next aspect of a financial plan is to determine the pattern of financing. There are a number of ways for raising funds. The selection of various securities should be done carefully. The funds may be raised by issuing of capital and debentures, raising of loans etc. Once a pattern of financing is selected then it becomes very difficult to modify it. A financial plan also spells out the policies to be pursued for the floatation of various corporate securities, particularly regarding the time of their floatation.

A financial plan should be carefully determined. It has long-term impact on the working of the enterprise. It should ensure sufficient funds for genuine needs. Neither the plans should suffer due to shortage of funds nor there should be wasteful use of them. The funds should be put to their optimum use. The main objectives of financial plan are as follows:

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Financial Management is one of the crucial functional areas of management, because the success of a company wholly depends on the proper use of its financial resources. The significance of financial management cannot be overstressed. Sound financial management is necessary in all organizations whether big, small or medium.

Financial Management is directly related with the managerial activities like raising and utilization of available funds in the best economic way. Financial management refers to that part of the management activity, which is concerned with the planning, and controlling of firm’s financial resources.

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Finance is universally considered as the life & soul of business, trade, commerce and industry.

Finance is highly cardinal part of a business, essential for a business organization, and very vital for execution of business plans.

The activities of employees, workers, officers, traders and industrialists are moulded by the financial factors. Maintaining a proper amount of finance is a key to success. The better a company manages its finance structure, the less the company needs to borrow.

No economics activity can be carried out without required finance. It is common sense that for commencing and running any business, there is need to mobilize funds. These funds are required for diversity of functions; for plant and machinery; for wages and salaries; for lands and buildings; for insurance and taxes; and for all kinds of trade expenses.

Finance can be defined as, “The money needed by an individual or company to pay for something, for example, a project or stocks.”

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Capital gearing is the most crucial factor, which must be taken into account while preparing the financial plan of a company. The term ‘gearing’ means the ratio between the various types of securities to total capitalization. Capital gearing is the process that determines the proportion in the various accounts of securities, which are being issued.