The most significant advantage of a budgetary control is to facilitate management to demeanor business in the most proficient manner because budgets are prepared to get the efficient exploitation of resources and the realization of objectives as proficiently as possible.
- Budgeting focuses on specific and time-bound targets and thus, helps in attainment of organizational objectives.
- Budgeting is a source of motivation to the employees who know the standards against which their performance will be appraised and thus, enables them to perform better.
- Budgeting helps in optimum utilization of resources by allocating them according to the requirements of different departments.
- Budgeting is also used for achieving coordination among different departments of an organization and highlights the interdependence between them.
- It facilitates management by exception by stressing on those operations which deviate from budgeted standards in a significant way.
However, the effectiveness of budgeting depends on how accurately estimates have been made about future. Flexible budgets should be prepared which can be adopted if forecasts about future turn out to be different, especially in the face of changing environmental forces.