Question

Managers often complain that budgeting is a waste of time because events often happen that are outside of their control, meaning the budget target is not reached. Explain: a) Some of the advantages of budgeting b) Why the above objection may not be a valid reason not to undertake any budgeting.

Answer 1

Budgeting has several advantages, including planning and control, performance evaluation, and communication and coordination. The objection that events outside of control make budgeting a waste of time may not be valid because budgeting still provides many benefits.

Step-by-step explanation:

There are several advantages of budgeting:

1. Planning and control: Budgeting helps managers plan and set goals for their departments or organizations. It allows them to allocate resources efficiently and identify potential problems before they occur. By monitoring actual expenses against planned amounts, managers can also exercise control over spending.
2. Performance evaluation: Budgeting provides a benchmark for evaluating performance. Comparing actual results to budgeted amounts helps managers identify areas of improvement and take corrective actions if needed.
3. Communication and coordination: Budgets help in communicating organizational goals and objectives to employees. By involving employees in the budgeting process, managers can foster coordination and collaboration within the organization.

The objection that budgeting is a waste of time because events often happen that are outside of control may not be a valid reason not to undertake any budgeting. While it is true that unexpected events can occur, having a budget still provides many benefits. Budgeting helps managers have a clear roadmap and be prepared for various scenarios. It also provides a basis for decision-making, resource allocation, and performance evaluation.