Behavioral aspects of budgeting

Budget is an essential controlling tool. It can help to plan, implement, execute and manage the strategic plan for the organization. There are behavioral issues relating to budgets such as dysfunctional behaviors of manager and budgetary slack. These behavioral issues become more obvious when their actual performance is to be compared with and evaluated against budget performance. The outcome of the comparison and evaluation can have a direct relation to the amount of incentives (monetary and non-monetary) they can receive. This paper discuss the purposes of budgets, the approaches towards budgets as well as the behavior aspects of budget. There is a survey conducted on 20 employees. This survey is on how budget is viewed in their organization. There are 10 questions, with multiple-choice answers. All surveys are completed in full. There is a discussion on alternative budgeting methods for example Balanced Scorecard. It is a combination of financial and non-financial measures, which organization can consider adopting. There are 4 perspectives of Balanced Scorecard: Customer perspective, Internal Business Processes perspective, Innovative and Learning perspective, and Financial Perspective. The use of Balanced Scorecard can help to overcome the behavioral aspects of budgeting.