Advantages of Budgeting

There is an old saying that "a man is usually down on what he isn't up on". Managers who have never tried budgeting are usually quick to state that budgeting is a waste of time. Companies realise many benefits from a budgeting programme.

Among these benefits are the following:

• Budgets provide a means of communicating management's plans throughout the organisation.
• Budgets force managers to think and plan. In the absence of the necessity to prepare a budget, too many managers would spend all their time dealing with daily emergencies.
• The budgeting process provides a means of allocating resources to those parts of the organization where they can be used most effectively.
• The budgeting process can uncover potential bottlenecks before they occur.
• Budgets coordinate the activities of the entire organisation by integrating the plans of the various parts. Budgeting helps to ensure that everyone in the organisation is pulling in the same direction.
• Budgets define goals and objectives that can serve as benchmarks for evaluating subsequent performance.

The budgeting process involves a lot of time and cost. The budgeting process leads to greater efficiency and profits. Moreover, with the advent of computer spreadsheet programmes, a budgeting programme can be implemented and maintained at minimal cost.