Disadvantages Of Budgetary Control

(iv) Advantages

Budgetary control serves as a valuable aid to management in planning, co-ordination and control.

The principal advantages of a budgetary control system are enumerated below: o Budgetary control aims at maximisation of profits through effective planning and control of income and expenditure - directing capital and resources to the best and most profitable channel. o There is a planned approach to expenditure and financing of the business so that economy is affected in the utilisation of funds to the optimum benefit of the concern. o It provides a clear definition of the objective and policies of the concern and a tool for subjecting these policies to periodic examination. o The task of managerial co-ordination is facilitated through budgetary control. o Since each level of management is aware of the task and is fully conscious as to the best way by which it is to be performed, maximum effective utilisation of men, materials and resources can be attained. o Reports are furnished under the principles of management or control by exception. Only deviations from budgets which point out the weak spots and inefficiencies are properly looked into. o It cultivates in the management the habit of thinking ahead - making careful study of the problems in advance before taking decisions. o A budgetary control system assists delegation of authority and is a powerful tool of responsibility accounting. o Budgets are the fore-runners of standard costs in the sense that they