One of the advantages of a budget is that it forces management to evaluate the reasonableness of assumptions used in the budgetary process and goals that have been set.
A budget is a realistic plan for the future expressed in quantitative terms. A budget is a very useful tool and can serve as a tool in a number of areas: planning, control, evaluation, motivation, communication, identifying future problems. Developing a budget is an important step in the process of control. However, a formal budgetary process alone will not ensure improved cost control or prevent inefficiencies. After the budget has been developed, it must be used as a tool by management to accomplish those objectives.
The budget communicates and authorizes actions and also promotes coordination within an organization. This is an advantage of a budget.
A budget provides criteria against which to measure performance during the upcoming period. Therefore, it does provide a formal benchmark to be used for feedback and performance evaluation, and that is an advantage of budgeting.
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