The given statement is true because the budget is usually considered a tool that is used by the organizations for evaluating the overall performances of the managers or the employers of a company in order to make certain whether the decisions taken by them are effective or not for a particular company. Managers prepare the budget for a particular financial year or a month or it can be prepared on a quarterly basis as well. Then they will compare the actual budget with the desired budget in order to anlayze how much improvement is required. This comparison would help them in highlighting the areas that worked according to the plans made by them and it will also highlight the areas which require improvement. In this manner, managers will succeed in maximizing the profits or revenues for a company and minimizing their costs as well. A company can increase its savings if managers succeed in making and comparing budgets. In this manner, it is said that budgets can be used to manage incentives or bonuses for managers.

A budget facilitates coordination between separate activity units in order to ensure that all parts of the company are in balance with each other and know how they fit in. It would help in disclosing the weaknesses in the organizational structure. It is the budget that is used for making communications to staff regarding what is expected of them.