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Budgetary control

Updated: Aug 20, 2021

A system of controlling expenditure and income used by the management of a business. Each department in the business forecasts its probable expenditure or income for the coming financial period. These forecasts or budgets are scrutinized and approved at top management level, so that a provisional profit and loss account for the coming year can be drawn up and, if necessary, expenses pruned or sales policies revised. The system varies from firm to firm. Generally speaking budgets must be adhered to and any deviations during the relevant period are reported so that action can be taken if necessary. The major benefits that should arise from an effective budgetary control system include: (1) the availability of cash to fund a foreseen capital expenditure programme; (2) the minimization of the risk of overtrading.

Reference: The Penguin Business Dictionary, 3rd edt.

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James Knight
Editor of Education
James is a lead content editor for Invezz. He's an avid trader and golfer, who spends an inordinate amount of time watching Leicester City and the… read more.