CIMA P1 Syllabus B. Budgeting - Advantages And Disadvantages Of Implementing Budgets - Notes ^{2 / 6}

Forces the organisation to plan and set targets

Allocates responsibility

Encourages coordination and integration between departments

Can motivate employees

Provides targets to evaluate performance

Can result in plan fixation and loss of flexibility

Can be time consuming

Can be demotivating if considered too hard

Variance reports and other evaluation outputs do not offer solutions

Deemed successful if achieved, but no incentive to exceed

Encourages spending in order to protect the allowance in future periods