Quiz 15: Budgeting and Controlling Operations and Taxes

Business

The entrepreneurial process is full of ups and downs. The entrepreneurs try their level best to make their businesses reach heights. They plan multiple steps to achieve business goals and objectives. They implement the planned strategies to receive the desired outcome. The foremost step towards setting up a business is planning. Control comes into existence when the planning is completed. The controlling process checks and ensures whether the organizational objectives are achieved. Control should not be misinterpreted as dominance. It is an essential step as it keeps vigilance on the implementation of the planned process. If the performance is not up to the mark, the controlling system looks for the reasons for the same. The functioning of the planning process is made smooth with the help of 'control'. Control process comprises of five steps. • Establishing standards of performance : Parameters should be decided to set standards of performance of the business. • Measuring actual performance : The performance of the employees and the overall business growth should be done. • Relative comparing of actual performance with set standards : The actual performance measured in step 2 will be compared with the set parameters of step 1. • Observing if any excessive deviations are there : Any deviations which can hamper the growth of the business in any way should be highlighted. • Determining the best corrective action : The best solution to eliminate or to reduce the impact of deviation should be explored and implemented. The above five steps of controlling process ensures that the performance of the business should not suffer in any case. A business takes a lot of efforts to get established, similar zeal is needed to make it work as per expectations. To achieve the productive outcomes planning and controlling are must to be done.

The levels of achievement are formulated by many companies to see and track the growth of companies as per set expectations. The entrepreneurs work very hard to achieve the goals and objectives of the businesses. On the similar lines, the need to make levels of achievement for employees is observed and the companies start to set performance standards with reference to the same. Performance standards are acceptable levels of work set in advance by the top-management of the company. These are performance indicators of the employees. These standards are measured in units consumed/produced or price paid/charged. They are developed on the basis of multiple factors including intuitions, past performances, activities observation, and relative comparisons with some other set standards. There are multiple uses of setting performance standards. These standards provide right direction to the employees to comply with the requirements of the company. They are made to make the employees aware about the company's expectations from their work performance. These standards also act as indicators to check how well employees are meeting the set expectations. They motivate employees to work towards achieving their goals and objectives. Some of the examples of performance standards are as follows: • Time taken to produce a product or a service is measured in 'standard hours per unit'. • Money spent to buy a product of service is measured in 'price per unit'. • The efficiency of a car in terms of its average is measured in 'miles per liter'. • The late arrivals of an employee are measured in 'average number of minutes per day'. It can be concluded that performance standards are a means to achieve excellence in the work done or work committed. They are important both for the employees and the employers. These are like parameters or rubrics of assessment which make it easier for the employers to check the employees work process. They also make it feasible for the employees to set specific targets as per these standards.

Budget is planning of expenses in advance. Making a budget is important not only for businesses but for household activities as well. It manages the finances and restricts unnecessary expenditure. The importance of a planned budget can't be determined verbally. It carries many practical benefits. Budgetary control is the system of budgets used to control a firm's financial activities. It involves careful planning and tracking of all the financial activities going on in a firm. The poor performance areas of the firm are frequently monitored and controlled by this system. Finance is the most powerful element in a business. All the financial transactions and financial statements are made to reflect the firm's status of finances. Budgetary control helps in proper analysis of all the financial statements so as to provide the exact financial status of the firm. Budgetary control system is a useful tool for small business. It is exclusively designed to keep a control on financial affairs. Using this system, all the details of financial statements are checked on a frequent basis to avoid any mismatch of business transactions. This system provides emphasis on the impacts of poor performance on the company and finds out the corrective measures to rectify those impacts. Costs and utilities are checked with the help of this system. Small businesses often make mistakes while calculating profit, expenses, additional costs, inflation, and sales. It is quite common to get confuse or to get a wrong calculation as many figures are involved in the process at the same time. Hence, a proper budgetary system is useful to correct all the flaws which may occur due to any unavoidable circumstances.