Behavioural aspects of budgeting – ACCA Performance Management (PM)
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The focus is to plan.
If the budgets are being used as targets, then the focus for that is to increase profit (more revenue and/or less costs).
Sir, if a question appears in the exam regarding Behavioral aspect of Budgeting it could include regarding How we (managers and staff) react to the budget. If it is Top-down how we react if bottom-up our reaction (negatives and positives). We can also include Budgetary Slack or Padding and Dysfunctional Behaviour and Budgetary Bias. Also sir should we focus on the Management Styles by Hopwood?
Thanks John. For some people they see the budget as a pot of cash whereby they can just spend money. Goal congruence is the key in budgeting.
sir,
could you kindly explain why would managers budget more ?
if they know they can achieve 10,000, wouldn’t it be better for them to budget less and that way they can achieve the target easily and get their bonus as well?
why budget more than what they can achieve?
thank you sir
When they budget costs, then to do well they need to spend less than budget!!
True, the question is on like target or goal setting – Where you target to achieve 50000 profit and if you do 60,000 good for the managers to get bonus. In otherway, if they say i spend 20,000 in budget for production but end up spending 15000 only, that is also good for the manager to raise their profit. (contrast attraction between cost and Income) thats it.
While budgeting, need to have an understanding of what is my focus is ? Increasing revenue or reducing cost ? both will have impact over profit anyway.