All managers (top down or bottom up) would be required to plan ahead and make gettable goals and these goals are generally in the nature of recurring in each time frame.
A budget plan shall made in such a way that they can easily be divided into some sub-parts. This would make sure that they are evaluated separately and work as a early warning system. This allows early detection of potential fluctuations and thus corrective measures are undertaken.
Budgetary activities and exercise make the managers more aware of the operating activities of the organisation and how economic fluctuations outside (in the economy) have impacts over the firm’s production and delivery system.
Budgetary planning control mechanisms motivate each employee to get to the goal and meet the desired and expected performance level. It helps to achieve greater targets without increasing the stress level of individuals.
However, the budget making exercise is just another aid which is available to the management of an organisation. It is clearly not a substitution for the management itself. Budgetary provisions can’t be implemented on its own. Budgetary provisions and the benefits of budgeting exercise can be achieved only if the managers of an organisation implement them well.
However, budgetary control mechanisms can fall short under the following circumstances if not guarded with adequate managerial wit:
Employees accepting the provisions
Sometimes, the budget and the whole exercise are made in manner that the middle and lower level employees think that they are left out of the entire planning stage and the provisions came to them as orders. Thus they feel let down by the management and don’t identify themselves with the budget and its provisions. Such a budget can be problematic in implementation and it might be possible that there are wide variations. This requires the inclusion of all the employees in the budget making process and that’s how they feel involved. When the employees are well informed of the plans and are more inclined to understand the goals and the benefits, the budget would naturally succeed (Kieso, 2013).