Disadvantages of imposed Budget

Disadvantages of imposed Budget

1.     Challenging Targets

First disadvantage of imposed budgeting is challenging target setting. Target set under this methods are too challenging and difficult to achieve. This situation may create resentment in junior management. This situation will also create UN necessary pressure on junior management to achieve un realistic target set by budget.

2.     Demoralization

Second disadvantage of imposed budget is demoralization of junior management. The moral of management will be low moral over non consultation. The junior management will feel powerless and this will adversely affect the performance.

3.     Poor Communication

Third disadvantage of imposed budget is communication gap between lower and higher management. Due to little communication between top management and the lower management many operational aspect will remain un incporated in the budget. There will be over focused on strategic objective and importance of operation in achieving the overall objective is ignored.

4.    Talent is not explored

Fourth disadvantages of imposed budget are limited exploration of operational management. In this technique due to little interaction between management and operational management, the talent of operation management does not exposed to top management.

5.    Operational aspect are ignored

Fifth disadvantage of imposed budget is ignorance of operational aspect of the organization. It means many operational aspects are not incorporated in budget. Therefore budget may be less accurate.

Advantages of Imposed Budget

Advantages of Imposed Budget

The budgets are prepared by the senior Management and junior management is informed to achieve the targets. There is no effective involvement of junior management in decision making process.

1.    Time Saved

Because the decision making is in few hands therefore immediate decision can be made.

2.     Overall Direction

This technique helpful to achieve the overall direction of the organization as senior management set the overall direction and they prepare the budget keeping in mind the strategic objective.

3.    Lower Management Biased

Third advantage of imposed budget is that it can avoid the lower management biased toward budget preparation. When lower management is engaged budget preparation, they can influence the budget for self interest.

4.    More Control on resources

The fourth advantage of imposed budget is that it brings more control in the organization. Top management takes decision about the utilization of resources in the best interest of organization.

5.    Experience is important

The fifth advantage of imposed budget is preparation by the experienced managers. Budget preparation required a lot of depth knowledge and understating of business.