Benefits of Budgeting

1. Planning is Facilitated
During the time of planning, goals and objectives are set. The direction of the business is
defined and the appropriate strategies to be adopted are identified. The preparation of
budget facilitates the conduct of planning. Simply put, the formulation of plans is facilitated
through the preparation of budget.

2. Financial Coordination is Established

A unit in an organization does not operate independently. Rather, its activities are properly
coordinated with other units or departments in the organization.
Budgeting helps with the coordination of different units because it binds the different
activities that have financial implications into one stronghold.

3. Resources are Properly Allocated

Business resources are scarce, and by nature, are limited. On the other hand, business needs
or requirements are almost unlimited.
The proper allocation of resources contributes to the efficiency of the business organization.
The use of budget significantly contributes to the success of business activities.

4. Morale of Employees is Improved

When employees are given the opportunity to participate in the preparation of the budget,
employees become highly motivated resulting in improved production performance.

5. Control Mechanism is Enhanced

The budget is the final result of all planning activities that have been expressed in monetary
forms. It directs the financial course of the business so that goals and objectives are achieved.