Business budgeting

Advantages and disadvantages of business budgeting


Understanding the advantages and disadvantages of budgeting will help you to create and use them effectively.

Advantages of budgeting

There are a number of benefits of drawing up a business budget, including being better able to:

  • manage your money effectively
  • allocate appropriate resources to projects
  • monitor performance
  • meet your objectives
  • improve decision-making
  • identify problems before they occur - such as the need to raise finance or cashflow difficulties
  • plan for the future
  • increase staff motivation

Disadvantages of budgeting

There are also some potential disadvantages to budgeting, depending on the circumstances of your business:

  • a budget could be inflexible, and not allow for unexpected circumstances
  • creating and monitoring a budget can be time consuming
  • budgeting could create competition and conflict between teams or departments
  • if targets are unrealistic, employees could become stressed and under pressure
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