Shortcomings Of Budgetary Control Explained
“Despite its long list of benefits, budgetary Control system has certain limitations. The budgets are prepared for the future needs of society. But the future is always uncertain and the situation that is presumed to prevail in the future may change. ”
Every management wants to exploit available resources in the best way to gain profit. To achieve this aim it has to devise a monitoring system, which keeps the management informed about the implementation of plans. A budgetary Control system is a must to evaluate the performance of different departments.Despite its long list of benefits, budgetary Control system has certain limitations. The budgets are prepared for the future needs of society. Despite the best efforts the predictions may not always come true. The future is always uncertain and the situation that is presumed to prevail in the future may change. These changes upset the budgets, which have to be prepared on the basis of certain assumptions.
Budgets are prepared on the assumption that certain conditions will prevail and some will not prevail. The frequent revision of the set targets is essential to update with changing situations but these revisions reduce the value of budget and involve huge expenditure too. Under budgetary control system targets are given to every person in the organization.
The common tendency of the people is to achieve the target only. There may be some efficient persons who can exceed the targets but they will also feel contended by reaching the targets. So budget may serve as a restraint on managerial initiatives. The success of budgetary Control system depends upon synchronization of different departments.
The performance of one section affects the results of other departments. To overcome the difficulty of coordination a budgetary official is needed. Every concern cannot have the funds for a budgetary officer. The lack of coordination among different departments results in poor performance. Budgetary Control can also lead to disagreement among functional departments.
Every departmental head worries for his departmental objective without thinking of overall business goals. Every department tries to get the greatest allotment of funds and this raises a variance among different departments. Budgetary Control system depends upon the support of top management.
The administration should be passionate for the accomplishment of budgetary control system and should give full support to it. If at any time there is lack of support from top management this budgetary control system will disintegrate.
Author - DeeKay
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