Advantages of Budgets
Budgets are an integral part of management control systems. a As we
have discussed at the start of this chapter, when administered
thoughtfully by managers, budgets do the following:
1.Promote coordination and communication among subunits within
the company
2.Provide a framework for judging performance and facilitating
learning
3.Motivate managers and other employees
Challenges in Administering a Budget
The budgeting process is time-consuming. Estimates suggest that
senior managers spend about 10–20% of their time on budgeting and
financial planning departments spend as much as 50% of their time on
it.
For most organizations, the annual budget process is a months-long
exercise that consumes a tremendous amount of resources
