Limitations of Budgetary Control
While the advantages of a budgetary technique are unquestionably impressive and for reading, certain limitations and pitfalls of budgeting need to be mentioned.
1. Budgeting control based on estimates
Budgeting is not an exact science; a certain amount of estimate is present in all budgetary plans. A revision or modification of estimates should be made when variations from the estimates warrant a change of plans.
2. Needs co-operation and participation of all
The success of budgetary control depends on the active co-operation of all concerned members of the department.
3. Lack of flexibility
Budgets are prepared in advance and based on estimates, later on, some changes are desired but budget estimate remains the same. Thus, flexibility will be lacked.
4. Expensive tool
The use of budgetary control technique is expensive, a small organization cannot afford its cost.
5. Continuous check
The success of budgetary control depends upon the constant checks. It should be exercised on controlling various activities.
6. It needs the determination of responsibilities
The success of budgetary control depends upon a well defined organizational system. Here, the responsibilities are fixed which are needed for control.
7. Needs various accounting information
The success of Budgetary control depends upon accounting data thus, adequate accounting records should be maintained according to the need of budget centers.
8, Budgeting control consumes a lot of time
The installation of a budget takes a lot of time. Sometimes the management becomes impatient and loses interest because it expects too much too soon. The budgeted plan is explained to responsible persons, must be guided, trained and educated the fundamental steps, methods and purpose of budgetary control. All this requires too much time to know the system of budgetary control.