Objectives

Every company, irrespective of the size relies on the budgets and the system of budgetary for achieving the strategic goals. The success factor of the budget lies in the analysis of the goals and vision of a  company and the implementation of the strategies. Budget is considered as a technique of management accounting that offers good results only if it is understood and implemented properly (Pamela & Frank, 2010). The procedure of  budgeting comprises of establishment of strategic goals and goals for the sales, cost, production and the cash flows (Harold, 2010). The result of the entire procedure is the preparation  of the main document which is considered as budget. As per the study by Ndlovu (2015), budget is nothing but a part of quantitative analysis for the purpose of gaining company’s objectives. The main objective with which budget is prepared is aiding in the achievement of the objectives and management in the company. However, it is considered that there are mainly two types of aspects, technical and behavioral aspects associated with budget preparation that affects the probability of its success in a huge manner.

Though, the technical aspect is emphasized to be important (Surianti & Dalimunthe, 2015). Pamela & Frank (2010)  revealed in his study that the determination of behavioral aspect of budgeting is also important, if congruence is to be acquired. Companies need to recognize that the efficient usage and implementation of the budget is mainly associated with the extent to which people working in the company stands in favor of the budget preparation in accordance with the goals of the company.

This research study targets to examine the behavioral aspect in budgeting.

The resrecah study fouces on determining whether budgeting is affected by behavioral aspects.

A budget document is a formalized document which includes various statistical and analytical data aimed at helping the company achiev their setobjectives. They basically act as a road map in the strategic selection and its implementation. However, during the time of preparation of the budget, it acts as a controlling device by the management people. Some of varied roles played by the budget factor, which helps in offering a platform base for the successful  functioniong of  business operations have been mentioned below (Irene, 2010):

• The procedure followed in budget preparation offers a foundation for the implementation of the strategies, which makes sure that the strategies are implemented with the objective of optimum utilization of resources (Pamela & Frank, 2010); .
• The process followed in budget preparation, helps in fostering the coordination factor in varied operational units of the company. This factor helps in promoting communication and making association io between the departments more easy and understandable. Through this process, it becomes easy for managers to attain the goal (Sage, 2015).
• Budget preparation looks forward to acquiring optimum usage of resources and awareness of cost factors for becoming relevant (Harold, 2010). However the main challenge lies in quantification.

A difference of the actual result against the projections of budget offers a base for evaluation of performance and signals areas that require corrective actions. This type of comparison can be quite meaningful as it determines the variances and investigations.

Motivation can be considered as the fuel that helps the employees working in the company in achieving strategic objectives that givern the success of any company (Irene R. S., 2010) ; (Pamela & Frank, 2010). Gaining the congruence of goals is mainly an issue of behavior. Involvement of  employees in budget preparation is important as such involvement helps the company in offering its employees some sense of purpose (Pamela & Frank, 2010).

The controlling factor of the company depends on the fact that how well the actions of the company are being managed by the senior officials of the company. Howevre, it also depends on the relationship in between hierarchy intervals. Management accountant in the budgeting process can mainly motivate the employees and enhance the attitudes of the managers of the company towards the control of budgeting. There are three approaches that can be employed in the development of the data budget preparation (Surianti & Dalimunthe, 2015).

• Imposed budget is a kind of autocratic budgets wherein the top management decides the contents of the budget. In such case, the subordinate staff has to follow the rules of execution of the budget (Harold, 2010).
• Participative budget, are types of budgets that are democratic in naturewherein the low level management is basically empowered owing to the  contribution of the budget.
• Negotiated budgets on the other side adopts both imposed budgets and participative budgets and develops environment where there are shared responsibilities for the preparation of the budget(Arnold & Gillenkirch, 2015).

Research Question

The approaches discussed above depend on the style of leadership and the nature of the company. It is considered that preparation of budgetby adopting participative and negotiated approaches would mainly elicit huge support from the workers. Simply engaging the pretext or consulting with the managers prior towards establishment of the goals of the budget is not considered as participation.

Study done by Noor, Haryanti, & Othman (2012) reveals that many budget schemes have been criticized for offering real participation level and contributing little value. Noor, Haryanti, & Othman (2012) also revealed in his study that the participation factor of budget needs to comprise of positive spirit in every such aspects which are associated with the designing of the system and corrective actions (Noor, Haryanti, & Othman, 2012). Other researchers like (Shutibhinyo, 2013) also depicted the impact developed by the budget on the job associated behavior which depends on the way in which managers use the budget rather than on the technical designing of the budget (Noor, Haryanti, & Othman, 2012). There are researchers that have determined the assessment of the human behavior with the help of the protagonist, which assesses the impact of the discretionary behavior of the management level people on the information collected. In such type of theories, the main assumption undertaken by the researchers is associated with the human behavior, which is examined by relationship in between agent and principals (Noor, Haryanti, & Othman, 2012). Such type of theories are helpful in analyzing the issues pertaining to  information collection (Noor, Haryanti, & Othman, 2012; Irene, 2010).

The level of participation needs to start with the level of job difficulty in the company. The study done by (Bakar, Amiruddin, & Auzair, 2014) shows that the factor of participation has been effective when the difficulty in the job and level of participation was at the high. However, the case was opposite when difficulty level was found low (Bakar, Amiruddin, & Auzair, 2014). In the case when job seems to be an easy task, then imposed budget are better in implementation. The other side (Jaakson & Kallaste, 2014) reveales that participation chemistry might lead to acceptance, but behavioral factor might outweigh the advantages that are being used by managers and it can further size the opportunities to bias estimates. Thus, it is very important for the company to understand cost benefit analysis and draft the same and thereby gaining ways of clear communication for the purpose of maintaining (Jaakson & Kallaste, 2014). Participation level in the budget preparation needs to be oriented towards its purpose and benefits while tempting to neglect the negative views and minimizing the dysfunctional behaviors  of  human beings (Jaakson & Kallaste, 2014). On the other side, clear objectives of budget preparation, rules drafted, responsibilities of employees and various other factors should be communicated in an effective way to the managers (Jaakson & Kallaste, 2014; Klemstine & Maher, 2014).

There are huge similarities in between the preparation of the public sector budget and preparation of private sector budgets. The main differences lie in the fact that public budgets are instruments of government agencies and are not designed with the objective of profitability. In the public sectors, the operational managers are the ones that input resources in the budget unlike the  counterparts in the private sector. Negotiated budgets seem to be operational in the public sector. Such approach uses the precise knowledge of low level managers with the broader perspectives of senior management level (Irene, 2010).

Literature Review

Consequently, all the agencies within the ministry are needed to make some presentation of the estimates undertaken by the company in the process development of the  budget. In the past many years, management accountants have been framing budget based on the benchmarks taken by the company in the previous years plus any type of additional information associated with it. Now days there are some management accountants that are referring the National Budget as the political benchmark instrument. In case budget is considered as factor of motivation then, it not just only involves the manager of the company, but it also involves workers of ministry level (Pamela & Frank, 2010).

Beyond Budgeting is specific idea that shows the abolition of the traditional process of preparing budget as the trigger for enhancing the management control within the company by fundamental re- examination of they can be managed more effectively (Olesen, 2014); (Sahota, Bogsnes, Nyfjord, Hesselberg, & Drugovic, 2014)

Traditional budgets used to hold the companies back, restrict the creativity of staff and used to prevent them from responding towards the customers. The process of beyond budgeting argues that the company today needs to be flexible in nature and even responsive in dealing with the unpredictable changes. (Sandalgaard & Bukh, 2014) has claimed that this needs effective management of strategies and replacement of the control designing of companies that are having a dispersion of authority. As per the study of (Shutibhinyo, 2013) ; (Nagel & Oliveira, 2014) the value of budgeting has diminished completely and it also continues to add, the least amount of value than it is expected, notwithstanding with the resources that are being ploughed in the activities. The concept of beyond budgeting is focused on the new steering mechanism for replacing the budgets wherein organizational and behavioral changes are required for supporting the new mechanism (Palladium, 2015).

Budgeting has been considered as one of the critical processes of management accounting. While preparing budget, factors like budget establishments, performance reporting and degree of uncertainty are to be considered (Harold, 2010). For the purpose of managing the factors in successful manner, high level sensitivity amongst the management accountants are required (Harold, 2010). Budgets are becoming more inaccurate as worldwide events are becoming dynamic. Many times, companies tend to expect the results from the budgetary controls and fails in recognizing that the main issue of budgeting is behavioral changes (Surianti & Dalimunthe, 2015).  

Conclusion

The resrecah question of our study was focused on Examination of Behavioral Aspect in Budgeting and its was well achieved through the analysis. It was determined that budgeting process is incomplete without behavioural interference of employees. It is required that the management accountants should recognize varied techniques of accounting and  their relationship with human behavior. The behavioral aspect of the budget preparation is quite significant and the management accountants are having the responsibility of minimizing the behavioral issues with the use of control management. Management accountants are required to work hard with the behavioral scientist for the purpose of gaining the importance of role played by human behavior (Harold, 2010; Pamela & Frank, 2010).

Budget is being considered as a mechanism of steering for the purpose of replacing the traditional management process of accounting.  The concept of beyond budgeting shows a shift in the financial measure performance towards human behavior. So, it is required to be accredited as new performance and evaluation technique for the management in the current time (Manan, 2011; Harold, 2010). In future, studies should focus on private sector also. A comaprtive study in between public and private sector budget will offer more light on the behavioral aspect in budgeting in both private and public sector.

References

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Sahota, M., Bogsnes, B., Nyfjord, J., Hesselberg, J., & Drugovic, A. (2014). Beyond Budgeting: a Proven Governance System Compatible with Agile Culture. agilealliance.

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Surianti, M., & Dalimunthe, A. R. (2015). The Implementation of Performance Based Budgeting In Public Sector (Indonesia Case: A Literature Review). Research Journal of Finance and Accounting, 6(12), 198-210.