In a budgetary control system, the actual performance of the company is compared with budgeted numbers to provide variances for analysis and investigation.
By comparing the actual performance with the budgeted numbers, the company could perform various functions to arrest weaknesses and further improve its performances. Such functions include action plans to motivate staff and to provide information to management which form the base decision of the future business plans.
The motivation objectives are aimed at guiding and directing the staff to work towards the company targets which in a manner that is consistent with the company plans. Such objectives can be achieved by setting standards for the staff and rewarding those that achieved them.
Most companies use performance bonus or incentive schemes to motivate the staff. However, the schemes must be carefully planned to deter abuse and unrealistic goals which can de-motivate instead of motivating the staff. The management reporting objectives are aimed to providing the management with the relevant information to manage the company.
Therefore, it is very important to plan and setup a system that tracks and records the relevant information for this purpose. When the management is equipped with such information, they can make decision on how to improve the performance. Many companies setup key performance indicators on critical areas. Monthly performance comparison and analysis reports are prepared and investigated for weaknesses.
It is very important that weaknesses are directed at the works and not to any individual staff. Constructive action plans are drew up to tackle every weakness in the company. It is important the action plans are given deadlines to complete.
On a periodical basis, say monthly, set up meeting with relevant management staff and discuss the progress of the action plans until they are fully implemented.
