- Business is done to compare the actual results with the budgeted plans.
- Aids in communication e.g. employees are fully aware of tasks to undertake within a certain period of time i.e. time budget.
- Increase efficiency as everyone want to accomplish what is expected of them.
- Evaluation of performance to know what was achieved according to the budget and what was not and why.
- Avoid time and money wastage as each is accounted for at the end of the period.
- Know output of employees as each departments achievement are seen.
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