Human Factors in Budgeting

Human Factors in Budgeting

The success of a budget program depends on three important factors:

1. Top management must be enthusiastic and
   committed to the budgeting process.
2. Top management must not use the budget to
   pressure employees or blame them when something goes wrong.
3. Highly achievable budget targets are usually preferred when managers are rewarded based on meeting budget targets.

The Budget Committee

A standing committee responsible for overall policy matters relating to the budget; coordinating the preparation of the budget; resolving disputes related to the budget; and approving the final budget

Choosing the Budget Period

Operating budgets usually cover a one-year period corresponding to a company’s fiscal year. Many companies divide their annual budget into four quarters.

A continuous (or ‘rolling’) budget is a 12-month budget that rolls forward one month (or quarter) as the current month (or quarter) ends.