What Are The Four Key Principles Of Budgetary Control?

Bogdan Büchner

You probably have heard that you need to keep track of your money to make sure you are making money. And this phrase is absolutely correct.

Business financial managers should always have an eye on their budget control process. However, you can have monthly, quarterly, or annual reviews.

By making the process more efficient, they can help their companies win more financial resources and keep their organizations' finances healthy.

This article will look at four fundamental principles you can follow to optimize your company's budget control.

What Is Budget Control?

Budgeting control refers to how a company compares actual spending with its budgeted amounts. Keeping spending under control doesn't just benefit businesses, but it also allows them to create more accurate budgets.

As a business finance manager, following up and ensuring your performance matches the original budget plan is essential. The budgetary control process allows you to track and measure expenses against the initial forecast and ensures that all budgeted funds are utilized accordingly. This system also encourages taking action against any variance to keep your company running cost-efficiently.

Key Principles of Budget Control

Here are four principles of budgetary control.

1. Setting Clear Financial Goals and Targets

The first principle involves creating a realistic and achievable budget based on your organization's income, expenses, and financial goals. Setting realistic goals helps ensure that the budget will be followed and met. It also helps to prevent overspending and keep the budget on track.

2. Creating a Realistic Budget

The second principle of budget control is creating a realistic budget appropriate for your needs. Analyze the business's current spending and identify areas where you could save money. Establish a budget based on your income and expenses, and ensure a cushion for unexpected expenses. Track your spending monthly to make sure you stay within your budget. Finally, remember to adjust your budget as needed if your income or expenses change.

3. Monitoring Actual Results Against The Budget

Monitor actual results and regularly revise the budget as needed. To do this, you should track expenses and revenue and compare them to the budget. Variances should be highlighted when goals are not met (or are forecasted to be off track). For example, when actual expenditures do not match budgeted figures. This, too, can be automated and should give warning in advance. If variances occur, it is essential to identify the root cause and take corrective action.

4. Taking Corrective Action When Necessary

Corrective action is integral to budget control and should be taken when necessary to manage the budget effectively. This may involve making adjustments to the budget or taking more drastic measures, such as dismissing staff or cutting certain services.

It is essential to act quickly and decisively when corrective action is needed to avoid any further losses. When making the next budget, your team will approach it from a stronger standpoint.


Budgetary control is essential for businesses to ensure that their resources are used effectively and efficiently. It involves setting budgets and monitoring actual performance against them.

Each of these principles highlighted in the article is important in its own right, but when applied together, they can create a powerful tool for financial management. When appropriately used, budgetary control can help an organization to achieve its financial goals and objectives.

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