Budgeting and Budgetary Control

Need to know

What you need to know

• **Advantages:** Budgets promote forward-thinking (Planning), align different departments (Coordination), clarify goals (Communication), provide targets (Motivation), establish benchmarks for performance (Control), and help in assessing managerial performance (Evaluation).
• **Disadvantages:** Creating budgets can be very time-consuming and expensive. They can introduce rigidity and slow down responses to market changes. If targets are seen as unrealistic, they can demotivate staff. They can also encourage 'budgetary slack', where managers build in buffers to make targets easier to achieve.