Benefits of Organizational Budgeting

A budget can be defined as a financial plan prepared in advance for the purpose of controlling expenditure of a business organization. In other words, it is a schedule for the future that outlines organizational spending. The time frame in consideration may be short, medium or long term in nature. The budgeting process requires in depth awareness of the organization’s mission and objectives as outline in its mission and vision statement and its strategic plan.

Benefits of Organizational Budgeting

  • It assists the management in planning, monitoring and controlling the performance of the organization.
  • Proper coordination of the organization departments so as to maximize their output to the overall organizational goals.
  • Acts as a guideline in decision making.
  • A budget provides a mechanism for measuring and controlling performance through comparison of budgeted and actual outcomes.
  • It acts as a motivational instrument to the workers. This is attributable to the fact that staff members are involved in such targets formulation and as such, they feel that they are involved in the running of the affairs of the organization. Achievement of the set targets acts as a motivational factor.
  • They enhance quality control since the various departments are linked through these budgets. In this way, errors in one department will not affect other departments and it is also easier to monitor such errors before they escalate into calamities which might affect the whole business.

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