Business Studies

AS Unit 2

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  • Created by: Morgan
  • Created on: 02-05-11 06:52

Budget:

An agreed plan establishing, in numerical or financial terms, the policy to be pusued and the anticipatted outcomes of that policy.

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Benefit Of Using Budgets:

 

  • They provide direction an co-ordination: spending is geared toward the aims of the business rather than those of the individual. It will be easier for the workforce to understand the fairness of the allocations or targets.

 

  • They motivate staff: According to Mayo and Herzberg, teams and individuals are encouraged by the responsibility and and the recognition gained from meeting budget targets. Some companies link rewards to the achievement of targets in a budget.
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Disadvantages Of Using Budgets:

  • They are difficult to monitor fairly: Senior managers will be less aware of detailed expenditure and costs, so they may have to rely on the hinesty of the budget holder in explaining a department or sections budgeting needs.
  • Allocations may be incorrect: Budgeting is based on predictions on future events.
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