Advantages of Budgets
Budgets are an integral part of management control systems. 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
