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Benefits of Self-Imposed Budget
Find out more about self-imposed budget.
Self-Imposed Budget
A self-imposed or participative budget is prepared with the full cooperation and participation of managers at all levels.
Advantages of Self-Imposed Budget
- Individuals at all levels of the organization are viewed as members of the team whose judgments are valued by top management.
- Budget estimates prepared by front-line managers are often more accurate than estimates prepared by top managers.
- Motivation is generally higher when individuals participate in setting their own goals than when the goals are imposed from above.
- A manager who is not able to meet a budget imposed from above can claim that it was unrealistic. Self-imposed budgets eliminate this excuse.
Self-Imposed Budgets & Budgetary Slack
Self-imposed budgets should be reviewed by higher levels of management to prevent “budgetary slack.”
Most companies issue broad guidelines in terms of overall profits or sales. Lower-level managers are directed to prepare budgets that meet those targets.
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