Advantage And Disadvantage Of Budgeting

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Recommended: Budgeting as an organizational planning tool

A budget Is a fundamental discipline for any organisation. The word Budget comes from an old English word `Bougett’ which means a pouch or sack. In fact, it was a leather bag from which the British Chancellor of Exchequer (in charge of finance) took out his papers, which contained government financial programme for the coming year to present in the Parliament. The budget has historically played the centre stage in most of the organisations, systems of management control. Any organisations strategies are incomplete without the budget which gives the forecast to the financial undertaking that the organisation should follow for their success. However, recently it has been the subject of considerable criticism (Hansenetal, 2003). This essay will …show more content…

In some cases, the budgeting consumes a lot of managerial time, that makes budgeting a costly process. even-though budgeting helps a lot of big companies to evaluate their performance and trends of future sales and margin, this makes the small companies hard to afford to budget because of its huge investment in labour and time. Budgets won 't always be accurate all the time. In this new competitive world, the prices and margins are constantly under pressure and it is unpredictable. This has been a big challenge to the organisations working with the sales forecast of the next period but the desired outcome is not achieved in the real world situations because of the varying market needs and …show more content…

These software packages may also be efficient enough to collect and link information from the company’s accounting department to create a simpler process for creating and managing budgets, which will also be alterable by the management, incorporating any other provisions. These software packages are usually an invaluable tool for managing financial information and reviewing information in a real-time format.

All these conclude for the importance and the need for budgeting in every organisation. Budgeting helps the company to know their current performance margin and they can evaluate it for the better outcome. As the quote by Allen Lakein goes, "Failing to plan is planning to fail". If budgeting isn 't done it can affect the whole financial system even though the use for budgeting is being criticised by many, it has its own merits that stands out, thus the use of budget is important in every

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