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Disadvantages of (BS) PDF Print E-mail
Written by Cecilia Chee, Singapore   
Monday, 03 October 2011 16:57

 

 

Disadvantages of Budget System (BS)

 

Budgets control can also create problems. The disadvantagesof budgets are:

  • The major problem occurs when budgets are applied mechanically and rigidly.
  • Budgets can demotivate employees because of lack of participation. If the budgets are arbitrarily imposed top down, employees will not understand the reason for budgeted expenditures, and will not be committed to them.
  • Budgets can cause perceptions of unfairness.
  • Budgets can create competition for resources and politics.
  • A rigid budget structure reduces initiative and innovation at lower levels, making it impossible to obtain money for new ideas.

These dysfunctional aspects of budgets systems may interfere with the attainment of the organization's goals. One generally accepted guideline for effective budgeting is to establish goals that are difficult but attainable.

Therefore, skilled managers who understand budgets and how to use them have a powerful control tool with which to attain departmental and organizational goals.

Last Updated on Monday, 03 October 2011 19:38
 
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