What are the human behavior problems that can potentially arise in the budgeting process and how to overcome them

Some of the human behaviors which can mar the efficacy of the budgeting process are:

Explanation:

Gamesmanship

Gamesmanship refers to the unethical practice by line managers to understate how much they can make within a financial period against their expenses for the same period. What this helps them to achieve is that during appraisal periods, "additional revenues" create a favorable variance which gives the team the appearance of positive performance.

This can be prevented by great oversight by the Chief Financial Officer and other members of the leadership over the budgeting process.

Use it or lose it syndrome

Toward the end of a financial period, managers authorize expenditures that are not necessarily required on the basis that their budget for the next period will be reduced if it is found that their budget for a particular period was underutilized.

This can be resolved by ensuring that departments are actually rewarded for accomplishing all their target objectives using a lower budget. HR and can work together with the accounting and finance team to achieve this.

Time taken to Prepare

In some organizations, due to internal bureacracies, it takes a very long time to come up with a budget. The best way to overcome this challenge is through the use of technology.

There are great apps such as Mint, Goodbudget, which not only helps with the budgeting process but also helps to track the spending process, recording them as the activities are carried out.

Blame game

This is the practice of projecting the problems arising from budgeting on other departments. The most common argument is that such units didn't give adequate support towards the attainment of its goals, hence the poor performance of the budget for that unit.

Greater training toward accountability can be used to correct this mentality. Also, the HR unit can build into the Key Performance Areas of the organization the section that measures the degree of accountability.

Cheers