QS Study

Benefits and Limitation of Budgetary Control

Budgetary control is a methodical control of an organization’s operations throw establishment of standards and targets regarding income and expenditure, and a continuous monitoring and adjustment of performance against them. It refers to how well managers utilize budgets to monitor and control costs and operations in a given accounting period.

Benefits of budgetary control: The benefits of budgetary control are summarized below –

  • Budgets communicate management’s plans throughout the organization.
  • It is a good guide to the management for making future plans.
  • It aims at maximization of profit through cost control and proper utilization of resources.
  • It is guided to the management in the field or research and development in future.
  • An effective system of budgetary control results in coordinated of all persons involved.
  • It facilitates an intelligent and planned forecast for the future.
  • It provides definite objectives for evaluating performance by each level of responsibility.
  • It motivates personnel throughout the organization to meet planned objectives.

Limitation of budgetary control: The limitations of budgetary control are summarized below –

  • Budgeting is a time-consuming process. During the preparation period, the business conditions may change and estimates may go wrong by that time.
  • The successful operation of budgets depends on the efficiency of the executive personnel.
  • Budgets are prepared with pre-determined targets. If the changes present condition of business, it fails to achieve the target of the plan.
  • If the responsible personnel executives are not co-operation, the budgetary control system will collapse.