What are the main disadvantages of the budgetary control system?
However, there are also disadvantages that come with a budgetary control system:
- Budgeting fails when departmental goals are allowed to surpass enterprise objectives. Functional budgets may not imitate the general goals of the organisation in their accurate perception. Similarly, the situation may demand that the departmental manager should not cross budget limit in the interest of overall business objectives. However, in this enthusiasm and eagerness to keep within budget limits, a departmental manager might overlook the enterprise aims.
- Budgeting can be quite expensive; it requires a lot of expenditure on time, money and effort. A substantial amount of time is needed in learning effective budgeting. Budgets cannot give results overnight, and great patience is required on the part of the management. It is possible that management can lose confidence and interest when it comes to budgeting, where fast results are expected.
- In practice, budgets often tend to become rigid. It comes difficult to make changes in budgets to suit the changing circumstance. Budgetary limits are regarded as final, and little scope is left for initiative and judgement on the part of the subordinate staff. Inflexibility makes budgets unrealistic and invalid under the changed conditions.