by
Khaliquar Rahman , Project Quantity Surveyor , WADI DAFA FOR CONSTRUCTION
Advantages:
The major strength of budgeting is that it coordinates activities across departments.
Budgets translate strategic plans into action. They specify the resources, revenues, and activities required to carry out the strategic plan for the coming year.
Budgets provide an excellent record of organizational activities.
Budgets improve communication with employees.
Budgets improve resources allocation, because all requests are clarified and justified.
Budgets provide a tool for corrective action through reallocation.
Disadvantages:
The major problem occurs when budgets are applied mechanically and rigidly.
Budgets can demotivate employees because of lack of participation. If the budgets are arbitrarily imposed top down, employees will not understand the reason for budgeted expenditures, and will not be committed to them.
Budgets can cause perceptions of unfairness.
Budgets can create competition for resources and politics.
A rigid budget structure reduces initiative and innovation at lower levels, making it impossible to obtain money for new ideas.
