Advantages and disadvantages of business budgeting
The benefits and potential drawbacks of budgeting for businesses.
Understanding the advantages and disadvantages of budgeting will help you to create and use them effectively.
Advantages of budgeting
There are a number of benefits of drawing up a business budget, including being better able to:
- manage your money effectively
- allocate appropriate resources to projects
- monitor performance
- meet your objectives
- improve decision-making
- identify problems before they occur - such as the need to raise finance or cashflow difficulties
- plan for the future
- increase staff motivation
Disadvantages of budgeting
There are also some potential disadvantages to budgeting, depending on the circumstances of your business:
- a budget could be inflexible, and not allow for unexpected circumstances
- creating and monitoring a budget can be time consuming
- budgeting could create competition and conflict between teams or departments
- if targets are unrealistic, employees could become stressed and under pressure
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