The advantages and disadvantages of the budget as an organizational control system A budget is a short-term financial plan of expected income and expenses for a certain period of time (usually one year) used to achieve a business objective. The budget can be useful for exercising control over a business because of its nature as a representation of a plan. Control is generally seen as making events conform to a plan. Since a budget is represented as a plan, allowing events to conform to it seems to be an obvious way to try to control the company. One of the main reasons plans fail is because they are simply unachievable. To gain and implement control over an organization it is necessary to discover the reasons why something did not go according to plan. Furthermore, it is essential that future budgets consist of achievable objectives and are adaptable to unpredictable changes. Since the primary objective of most companies is to maximize returns for their shareholders, it is fair to assume that the most important budget objective to achieve is the profit objective. This essay will therefore focus on the advantages and disadvantages of using the budget as an organizational control system in terms of how much it improves or impedes profit generation. To answer this question, we must first examine the reasons why budgets are used as a form of organizational control in the first place. The role of a budget is to put in place long-term plans for the immediate future. Used as a plan, it allows managers to analyze the difference between planned and actual results and with this information execute precise procedures to correct any negative variances to drive... middle of paper... time-efficient this It means they won't have to search through generic documents that aren't specifically aimed at them. Finally, it is essential to take positive action on relationships that reveal negative changes so that they do not occur in the future. It must also be recognized that the use of a budgetary control system can be limited. For example, unrealistic standards set are likely unnecessary and may have a negative effect on performance. A manager's performance evaluation and variance calculation may also be negative due to factors beyond his or her control. This limitation, however, can be overcome by differentiating controllable factors from those that are not. Some also argue that creating a clear distinction between the responsibilities of various managers may be difficult and this may eliminate one of the effective uses if budgetary control.