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Could you please tell me about the problems faced by the company when the traditional approach is revised to a new budgeting system and why it is revised?
Secondly I don’t understand what is behavioral aspects of budgeting and the purpose of it and when to use that?
Please help me with these two questions. I appreciate your help SIR 🙂
If the method of budgeting is changed then it will take time for those preparing the budgets to get used to the new system and therefore the budgets are likely to be less accurate.
I discuss the behavioural aspects in my free lectures on budgeting.
But why would the company choose to revise its budget in the first place and introduce a new budget system?
Is it true that there might be some arithmetical errors or previous errors carried forward in the current budget?
What are the other reasons to revise the budget that you can tell ??
It is not because of errors (for them they might well revise the budget, but that would not be a reason for revising the system used).
If, for example, they currently use incremental budgeting then they might decide that it would be more useful to change to zero based budgeting or to rolling budgets.
Also, if at the moment it is top-down budgeting, they might decide that it would be better to change to bottom-up budgeting because it can be more motivating for their managers.
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