Introduction to Benefits of Budgeting
Budgeting plays a vital role in planning and controlling. It assists in directing the scarce resources to the most productive use and so ensures complete efficiency in the organization. The advantages derived through an organization from an effective system of budgeting can be shortened as provided below.
I. Budgeting make easy planning of several activities and makes sure that the working of the organization is systematic and smooth.
II. Budgeting is a coordinated exercise and therefore combines the ideas of dissimilar levels of management in preparation of the same.
III. Any budget cannot be ready in isolation and hence coordination among several departments is facilitated automatically.
IV. Budgeting assists planning and controlling income and expenditure thus as to achieve higher profitability and also work as a guide for several management decisions.
V. Budgeting is an effective means for planning and so makes sure sufficient availability of working capital and other resources.
VI. It is very necessary to calculate the actual performance with predetermined parameters. Budgeting makes sure that there are well-defined parameters and so the performance is evaluated against these parameters.
VII. As the resources are directed to the most productive use, budgeting assists in reducing the wastages and losses.
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