Advantages and Limitations of Business Budgeting

In this video we talk about advantages and disadvantages of Business Budgeting.

Advantages of Business Budgeting

  • Determination of goals
  • Clear cut delegation of Authority and Responsibility
  • Development of cooperative and coordinating attitude
  • Improvement in communication
  • Performance evaluation and control
  • Optimal utilisation of resources
  • Cost consciousness
  • Increase in employee's morale and productivity
  • Measurement of efficiency
  • Management by Exception
  • Since input is required from multiple units, it promotes coordination, planning, and sharing
  • Allows a firm to anticipate problems so that corrective action can be taken early

Limitations of Business Budgeting:

  • Based on Estimates
  • Danger of Rigidity
  • Budget execution is not automatic
  • Internal Struggle
  • Encouragement to dictatorial tendency
  • No substitute of management
  • Expensive system
  • Time consuming
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