Scribd
Upload
227 views13 pages

Behavioural Aspects of Budgeting

Budgets are financial plans that set out anticipated revenues and expenditures over a period of time. They are an important management tool used for planning, control, coordination, communication, and performance evaluation. There are different approaches to budgeting such as top-down, bottom-up, and a hybrid top-down/bottom-up approach. Behavioral research on budgeting examines how it affects motivation, satisfaction, and performance, and how budgeting practices vary based on organizational factors like size, strategy, and environmental uncertainty. Budgeting aims to translate organizational objectives into specific plans and goals for managers while facilitating communication and coordination across departments.

Uploaded by

Kanumuri Mouli
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
227 views13 pages

Behavioural Aspects of Budgeting

Budgets are financial plans that set out anticipated revenues and expenditures over a period of time. They are an important management tool used for planning, control, coordination, communication, and performance evaluation. There are different approaches to budgeting such as top-down, bottom-up, and a hybrid top-down/bottom-up approach. Behavioral research on budgeting examines how it affects motivation, satisfaction, and performance, and how budgeting practices vary based on organizational factors like size, strategy, and environmental uncertainty. Budgeting aims to translate organizational objectives into specific plans and goals for managers while facilitating communication and coordination across departments.

Uploaded by

Kanumuri Mouli
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 13

BEHAVIOURAL ASPECTS OF

BUDGETING
Learning Objectives
INTRODUCTION
• Budgets are financial plans that set out anticipated revenues
and estimated expenditures over a certain period of time have
long been in use .
• While at the same time serving as means of expenditure
authorization and evaluation base has made them most
important tool that is at manager’s disposal today when
running a company .
Phases of Management Control
• Budgets as they are generally understood, form the
cornerstone of management control and the management
control system, they are a multi-purpose management tool
supporting –
• Planning
• Control
• Co-ordination
• Communication
• Performance evaluation
• Motivation.
• Feedback and feed forward
Models of control can be based on feedback or feed forward. A
feedback style is carried out after the event and is essentially
error-based. That is, the detection of a deviation between
actual results and an objective is what causes a control action
to occur.
Feed-forward Control System
Approaches in budgeting process
• Top Down approach: The top-down approach for budgeting
means that upper management completes the budgeting process
with minimal involvement from the management of individual
operating units or departments.
• Bottom up approach: The budget is established at the bottom
levels of the organization. At the operating units departmental or
cost /profit centre level and then brought up to the corporate
level.
• Guidelines and targets are set at the corporate level, but specific
amounts and budgeted account balances are not passed down to
the individual department.
• Top down/bottom-up: Top-down/bottom-up approach combines
and balances the best elements of the two approaches. This
approach allows input from lower and upper management into
the model. The budget process becomes collaboration between
lower and top management rather than a one-way exercise.
Benefits and problems associated in traditional budgeting:
• It is major formal way by which the organizational objectives
are translated into specific plans, tasks and objective related to
individual managers and supervisors.
• It is an important medium for communication of
organizational plans and objectives and of the progress made
towards meeting these objectives.
• The development of budget helps achieve coordination
between the various department and function of the
organization
• Management time can be saved and attention directed to areas
of greatest concerns by the exception principle which is at the
heart of budgetary control.
• Performance at all levels is systematically reported and
monitored thus aiding the control of current activities.
Factors after doing research in behavioural aspects of budgeting
• Psychology based research: the effects of budgeting on a
variety of potentially conflicting mental states and behaviour‘s:
primarily motivation, satisfaction, commitment, relation with
peers and superior and individual managerial performance
• Sociology based research: studies based on contingency theory
that argued that organizations adopt practices(such as
budgeting)that improved performance and these practices very
systematically depending on organizational variable such as
size, strategy, culture, environmental uncertainty,
organizational structure and technology.
• Economic based research: the budgeting practices like budget
performance measures, participative budgeting and so on as an
equilibrium response to labour market characteristics such as
uncertainty with respect to costs and demand and difference in
information between owners and managers.

You might also like