The study of the impact of welfare reform in Scotland, carried out on behalf of the Scottish Government, also found that information relating to benefit changes was hard to access, and their administration was often inconsistent and stressful.
It warns that moving more disabled people and lone parents on to jobseeker's allowance could be 'problematic' as the system does not consider the barriers faced by both groups in finding jobs.
The authors call for a review of benefit levels and earlier help for those who are struggling to cope. "The current system does not appear to be meeting people's financial needs, and participants reported making difficult choices about which essential household items to prioritise," it said.
The tracking study was carried out for the Scottish Government by Napier University and the University of Stirling.
A second report on the financial impact of welfare reforms looked at the winners and losers under changes to Working Tax Credits and the new Universal Credit. It concluded that losers included single renters under 35, and those affected by the bedroom tax.
The Scottish Government also published research into the new Scottish Welfare Fund, conducted by Heriot Watt University, which said people were satisfied with it.
Welfare Minister Margaret Burgess said the fund, which offers crisis and community care grants, provided a vital safety net.
The head of the Child Poverty Action Group in Scotland, John Dickie, said the SWF had been a vital source of support, but decisions could be faster. He added: "The current approach to UK welfare reform is having a devastating impact on tens of thousands of families across Scotland and undermining action to end child poverty."
The findings about the fundamental inadequacy of benefit levels, and delays and mistakes in the system were supported by the CPAG's own evidence, he added.
"It is vital that the UK Government publishes clear targets for dealing with benefit claims, ensures claimants have adequate financial support whilst claims are being considered and rethinks damaging cuts. Here in Scotland government needs to look further at how services can be adapted to respond to the increasing pressures families are under."