Why Budgeting A Necessity?

Budgeting is a financial plan for allocation of available funds. Why 'Budgeting' is neccessary?

Budgeting helps an individual, department and organisation achieve planned objectives.


Budgets helps to illustrate the financial responsibilities of the organization to its shareholders, lenders, suppliers, employers, customers and the owners.


Budgets are only as good as the individuals who prepare them. The validity and usefulness of a budget depend on the people who put it together.

Budgeting helps in planning of an organization in a systematic and logical manner for a long-term business strategy.

Budgeting helps in co-ordinating the activities of the various parts of the organization and ensure that they are consistent.

Budgeting helps in communicating more easily the objectives, opportunities, and plans of the business to the various business team managers.

Budgeting helps in motivating managers to try to achieve the organisational and individual goals.

Budgeting helps in controlling activities by measuring progress against the original plan, adjusting where necessary.

Budgeting helps in providing a framework for evaluating the peformance of managers in meeting individual and departmental targets.

In spite of its many advantages, Budgeting can increase paperwork and can be a drain on management time, especially early on.

Budgets are slow to work, since the benefits will not be seen until the next year. Budgets require standardization, which can lead to inflexibility.

Budgets can meet with resistance from managers with no willingness to accept new procedures.

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