From the course: Accounting Foundations: Budgeting
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Behavioral considerations in budgeting
From the course: Accounting Foundations: Budgeting
Behavioral considerations in budgeting
- We see that budgeting is as much about the people as it is about the numbers. The numbers help us achieve a goal, but always remember that the numbers themselves, they're not the goal. Research and experience has shown that several behavioral factors determine how successful the budgeting process is going to be. First, the process must have the support of top management. Without a clear indication from top management that the budgeting process is important to the organization, managers will not be motivated to devote the time necessary to formulate an effective and efficient budget. Second, managers and other employees are more motivated to achieve budget goals that they understand and helped create. For this process to work, managers must feel that their opinions are respected and given full consideration. In addition, when internal or external circumstances change, all parties involved should discuss the necessary budget adjustments. Generally, the most effective companies are…
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