The roles of Budget Analysis and Budgetary Controls on an organization's operation

Budget control is considered one of the most effective management tools companies have for planning and controlling their operations and decision-making.

The business budget is an essential strategy for any organization, regardless of its size or legal nature. Among the advantages of budget control, we can mention that it fully meets the basic corporate administrative functions of planning, control and execution. Established in public administration, it is also widely accepted among well-run companies.

Even if we can ask ourselves the question of the capacity of budgetary control to integrate all the dimensions of an organization, it is necessary to model its functioning well and define its orientations in terms of resources and objectives. 

Budgetary control will identify discrepancies; this is its primary role. However, it will not give managers and operational agents the keys to steering their activity and the dysfunctional processes compared to the norm provided for in the budget. 

Indeed, the budget does not assess the agents' skills, neither the evolution of citizens' expectations nor the attractiveness of a territory. In terms of decisions, budgetary control encourages the implementation of cost reductions rather than investment plans because it is a safer and easily measurable approach in the short term.

The budget process is a process that takes place in 5 major steps:

In this process, it is necessary to involve all the different stakeholders. But several pitfalls exist with this approach. Managers are tempted to underestimate their ability to build up performance reserves and thus exceed their budget. 

The budget cycle is so heavy that the manager can feel dispossessed of his ability to act, which is reflected in his motivation. Respecting the budget alone can then lead to aberrations of the type: "the users are not satisfied, but nevertheless I respect the budget; nothing to see".

Budgetary control should not be the only tool for steering the organization. Other indicators need to be put in place. The implementation of off-budget performance indicators makes it possible to counterbalance the weight of the financier in the approach to the quality of service and the satisfaction of internal and external actors. 

The directorates-general must analyze each month the indicators of deviations from the budget and a whole other series of external indicators. Only the synthesis between the budgetary objectives and the operational results makes it possible to validate a performance approach in a relevant way. 

Budget control remains for many a pledge of good management. The budget is constantly criticized for its perverse effects, but no one will question it globally. The current budget control tools combine the classic approach and the steering approach. 

Budget aggregates are combined with performance indicators. The operational manager can see the deviations and dig to identify the root causes and take corrective measures in real-time. 

Business Intelligence tools have adapted to this demand and meet these expectations in real-time, so they are developing intensively in their organizations lately.