Transcript Chapter9 behavioral aspects of budgeting

Chapter 9
Purpose of budgets
Copyright  2003 McGraw-Hill Australia Pty Ltd
PPTs t/a Budgeting, second edition, by Banks & Giliberti
Slides prepared by Mya Aronfeld
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Purpose of budgets
 Planning:
Necessitates setting of goals and establishing actions
needed to attain goals.
 Organising:
Involves the allocation of resources.
 Leading:
Two main aspects are communicating & motivating.
 Controlling:
Process of setting standards, measuring current
performance and taking remedial action if needed.
Copyright  2003 McGraw-Hill Australia Pty Ltd
PPTs t/a Budgeting, second edition, by Banks & Giliberti
Slides prepared by Mya Aronfeld
9-2
Behavioral aspects of budgeting
 To maintain supportive and cooperative
relationships with staff.
 The use of punishment (authoritarian style) tends
to encourage attempts to ‘beat the system’.
 Padding the budget means overestimating costs
and/or underestimating revenue.
 Participation in the budgetary process tends to
result increased productivity and satisfaction.
Copyright  2003 McGraw-Hill Australia Pty Ltd
PPTs t/a Budgeting, second edition, by Banks & Giliberti
Slides prepared by Mya Aronfeld
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Advantages arising out of staff
participation
 Improved communication.
 Greater understanding of what is involved.
 Opportunity to thrash out problems.
 Increased acceptance.
 Improved commitment.
Copyright  2003 McGraw-Hill Australia Pty Ltd
PPTs t/a Budgeting, second edition, by Banks & Giliberti
Slides prepared by Mya Aronfeld
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Factors affecting behaviour
 Targets perceived by employees as being too difficult.
 Targets that do not provide any challenge.
 Insufficient flexibility.
 Narrow-minded managers.
 Emphasis on financial goals to the detriment of nonfinancial goals.
Copyright  2003 McGraw-Hill Australia Pty Ltd
PPTs t/a Budgeting, second edition, by Banks & Giliberti
Slides prepared by Mya Aronfeld
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