Page 316 - SBL Integrated Workbook STUDENT 2018

Chapter 23

7.3 Effective budgetary control

 a serious attitude is taken to the system

 clear demarcation between areas of managerial responsibility

 budget targets that are challenging yet achievable

 established data collection, analysis and reporting techniques

 reports aimed at individual managers

 fairly short reporting periods

 timely variance reports

 action being taken to get operations back under control if they are shown to be
out of control.

7.4 Forecasting in budgeting

There are a number of ways to forecast the principal budget factor:

 it may use market forecasts of expected growth and build these into the
expected growth in its trend (although this assumes that the organisation will
grow at the same rate as the market).

 mathematical techniques such as linear regression (often compiled on a
spreadsheet) can be used to develop an expected linear growth in the trend
(although this assumes that the past behaviour will provide an accurate
estimate of the expected change in future behaviour).

 the high-low method could be used to forecast the change (though this is even
more limited than linear regression at it only considers two past observations).

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