For making a budgetary control system successful, following requisites are required
1. Clarifying objectives:- The budgets are used to realise objectives of the business. The objectives must be clearly spelt out so that budgets are properly prepared. In the absence of clear goals the budgets will also be of no use i.e. unrealistic.
2. Proper delegation of authority and responsibility:- Budget preparation and control is done at every level of management. Even though budgets are finalised at top level but involvement of persons from lower levels of management is essential for their success. This necessitates proper delegation of authority and responsibility.
3. Continuous budget education:- The employees should be properly educated about the benefits of budgeting system. They should be educated about their role in the success of this system. Budgetary control may not be taken only as a control device by the employees but it should be used as a tool to improve their efficiency.
4. Participation by responsible executives:- Those who are responsible with the performance of the budgets should participate in the process of setting the budget figures. This will ensure proper implementation of budget programmes.
5. Flexibility:- Flexibility in budgets is required to make them suitable under different circumstances. Budgets are prepared for the future and future is always uncertain. Even though budgets are prepared by considering the future possibilities but still some occurrences later on may necessitate certain adjustments. Flexibility will make the budget more appropriate and realistic.
6. Proper communication system:- An effective system of communication is required for a successful budgetary control. The flow of information regarding budgets should be quick so that these are implemented. The performance reports of various levels will help top management in budgetary control.
7. Integration with standard costing system:- Where standard costing system is also used, it should be completely integrated with the budget programme, in respect of both budget preparation and variance analysis.
8. Reasonable goals:- The budget figures should be realistic and represent reasonably attainable goals. The responsible executives should agree that the budget goals are reasonable and attainable.
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