Benefits and drawbacks of setting budgets

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  • Created by: noormalik
  • Created on: 18-10-14 15:38
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  • Setting Budgets
    • Drawbacks
      • 1. Conflicts can arise
        • departments may compete for larger parts of the expenditure funds available
        • short-term budget cuts may lead to long-term problems for the bus. if sales fall as a result
      • 2. motivation impact may fail to be achieved
        • very ambitious targets may seem virtually impossible to achieve
        • failure of input from budget holders will lead to the motivation impact being lost
    • Benefits
      • 1. Controlling finances
        • reduces the risk of over-spending
        • Allows more money to be allocated to under-performing departments or products
      • 2. improving staff performance
        • budgets can be used as a financial objective for  a department of a business
        • Staff motivation increases from being given responsibility to meet a budget


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