Question

What are effective strategies to reduce "budget slack" or "padding the budget”?

Answer 1

DEFINITION OF BUDGET SLACK

IT IS LIKE A CUSHION CREATED IN A BUDGET TO INCREASE THE CHANCES OF ACTUAL PERFOMANCES BEATING THE BUDGET

BUDGET SLACK HAS TWO FORMS

1. UNDERESTIMATE OF THE AMOUNT OF REVENUE OR INCOME

2. OVERESTIMATE OF EXPENSES THAT AE TO BE PAID OUT

BUDGETERY SLACK MEANS THE MANAGERS ARE ASKING FOR MORE RESOURCES THAN STRICTLY NEEDED

IT CAN BE REDUCED BY FOLLOWING WAYS

PARTICIPATION IN THE STRATEGIC PLANNING PROCESS, THEN MIDDLE MANAGERS WILL BECOME HIGHLY COMMITTED TO THE ORGANISATION AND CREATE LESS SLACK,THEY WILL FEEL THAT THIS IS OUR BUDGET RATHER THAN FEELING LIKE THIS IS THE BUDGET IMPOSED ON US

MANAGERS AND EPLOYEES SHOULD BE GIVEN INCENTIVES TO ENCOURAGE THEM TO MORE EFFECTIVELY

PERSONS WHO PREPARED BUDGET SHOULD ALWAYS BE AVAILBLE IN THE BUSINESS IN ORDER MAKE DECISIONS AND IMPLEMENT PLANS ACCORDING TO THE BUDGET.

BUDGET FACILITATES COMMUNICATION AND COORDINATION, ALLOCATION OF RESOURCES,

EVALUATION OF PERFOMANCES AND PROVISING INCENTIVES TO EPLOYEES.WE CANNOT ACHIEVE THESE WITHOUT A PROCESS OF BUDGETING

IN THIS WAY WE CAN REDUCE THE BUDGET SLACK