Budgetary Control

Limitations of Budgetary Control

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Budgetary Control

Cont… 3. Budgeting is only a tool of management

Limitations of Budgetary Control
1.The budget plan is based on estimates
Budgets are based on forecasts & forecasting cannot bean exact science.
2.Danger of rigidity
A budget programme must be dynamic continuously deal with the changing business conditions. Budgets will lose much of their usefulness if they acquire rigidity and are not revised with the changing circumstances.
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Cont…
3. Budgeting is only a tool of management
It cannot take place of management but is only a tool of management. “ The budget should be regarded not as a master, but as a servant. Expensive technique
The installation & operation of a budgetary control system is a costly affair as it requires the employment of specialized staff & involves other expenditure which small concerns may find difficult to incur (need to analyze costs- benefits ratio).
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