Advantages and D|sadvantages of 8udget Contro|

Llke oLher contro| methods budgeLs have Lhe poLenLlal Lo help organlzaLlons and Lhelr members reach
Lhelr goals 8udget contro|offers several advanLages Lo managers Some of Lhese are
O @he ma[or sLrengLh of budgeLlng ls LhaL lL coordlnaLes acLlvlLles across deparLmenLs
O udgeLs LranslaLe strateg|c p|ans lnLo acLlon @hey speclfy Lhetesootces teveooes and acLlvlLles
requlred Lo carry ouL Lhe sLraLeglc plan for Lhe comlng year
O udgeLs provlde an excellenL record of organlzaLlonal act|v|t|es
O udgeLs lmprove commun|cat|on wlLh employees
O udgeLs lmprove resources a||ocat|on because all requesLs are clarlfled and [usLlfled
O udgeLs provlde a Lool for correcLlve acLlon Lhroughrea||ocat|ons
Powever budgeLs conLrol can also creaLe problems @he dlsadvanLagesof budgeLs are
O @he ma[or problem occurs when budgeLs are app||ed mechan|ca||y and rlgldly
O udgeLs can demoLlvaLe employees because of |ack of part|c|pat|on lf Lhe budgeLs are
arblLrarlly lmposed Lop down employees wlll noL undersLand Lhe reason for budgeLed
expendlLures and wlll noL be commlLLed Lo Lhem
O udgeLs can cause percepLlons of unfa|rness
O udgeLs can creaLe compet|t|on for resources and po||t|cs
O rlgld budgeL sLrucLure reduces |n|t|at|ve and lnnovaLlon aL lower levels maklng lL lmposslble
Lo obLaln money for new ldeas
@hese dysfuncLlonal aspecLs of budgeLs sysLems may lnLerfere wlLh Lhe aLLalnmenL of Lhe otqoolzotloos
qools Cne generally accepLed guldellne for effecLlve budgeLlng ls Lo esLabllsh goals LhaL are dlfflculL buL
aLLalnable
@herefore skllled managers who undersLand budgeLs and how Lo use Lhem have a powerful conLrol Lool
wlLh whlch Lo aLLaln departmenta| and organ|zat|ona| goa|s