It’s that time of the year at least for those companies who have a December fiscal year. Financial managers and budget officers will be doing their usual thing to get the budgets
together. They will be working with managers on the business side to pare, slash, tweak or even discard them. In so doing they will draw on a variety of approaches ranging form the “scientific”, the intuitive and the forensic.
Of course, budgets rarely meet this objective. More often, revenues come in under budget, and expenses go over. Business units try to beat the system by under-forecasting
revenues and overstating expenses. Budget managers are aware of this and argue to boost revenues and reduce expenses. Each side plays a game based on, for the business side, how much they think they can sandbag revenues and expenses while the budget side, wise to this system, tries to figure out how much they need to boost revenues and reduce expenses to at least match, and preferably exceed, the level of sandbagging.
To see details about behaviorally-based budgeting, please click here.