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Human Aspects of Budgeting Budgetary Slack: Probing deeper!
Human aspects of budgeting refer to the human factors that are regarded as a vital part of budgeting. Budgetary slack occurs when a department or individual involved in budget preparation manipulates the budget only for making them look profitable. For doing this, the costs incurred are intentionally overestimated or the amount of products to be produced from their stable is intentionally underestimated. This is done to make them look better during a specific time, such as a single fiscal year.
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What Makes Human Aspects of Budgeting Budgetary Slack Important?
Budget administration needs intelligent interpretation, education, persuasion, and participation. Budgetary slack happens in the following cases, when:
- Workers do not stick to budgeted operations and plans
- Budget is too tough to take employees’ slacking time from work into account
- There is use of an imposed or authoritative budgeting process
- Workers demand more resources than they require, for satisfying the goals of the budget
- Workers demand fewer resources than they require, for constant improvement
It is important to understand all such human aspects that lead to budgetary slack and make it difficult to attain budgeting objectives in an organization. A complete understanding is also important in order to establish transparency in business practices and make profit statistics graphs and data more authentic. Not understanding human aspects or considering budgetary slack can make business statistics and growth data go haywire. Thus, it is important from the perspective of finance and economics.
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