Budgeting is by far one of the most important tools that can be used in vertically integrated organizations such as Procter and Gamble. Budgets are typically created on a yearly basis in order to control revenues, costs, and a variety of other functions performed by an organization’s managers. As a result, budgets are an important control tool for an organization but they can often generate negative consequences.

In year fiscal year ended December 31, 2011, P&G experienced some unintended negative consequences within its advertising budget. For example, in 2011 the company’s ad expense was $9.3 billion. This staggering amount is 11.3% of the company’s $82.6 billion annual sales for 2011. Note that the company’s annual advertising budget increased $700 million dollars from that of last year, which is hurting their ability to return earnings per share to investors. This large amount spent on annual product advertising needs to be monitored and control more frequently by upper level management because it is continuing to increase faster than annual sales increases. In fact, the company’s inefficiency in advertising can be displayed by observing that in 2009 every dollar spent of advertisement returned $10.20 in sales but in 2011 every dollar spent on advertising delivered only $8.86 in sales.