A budget that is prepared with the full cooperation and participation of managers at all levels. A participative budget is also known as a self-imposed budget.
Most companies do not rely exclusively upon self-imposed budgets in the sense that top managers usually initiate the budget process by issuing broad guidelines in terms of overall profits or sales.
Most companies do not rely exclusively upon self-imposed budgets in the sense that top managers usually initiate the budget process by issuing broad guidelines in terms of overall profits or sales.
Advantages of Self-Imposed Budgets:
1. Individuals at all levels of the organization are viewed as members of the team whose judgments are valued by top management.
2. Budget estimates prepared by front-line managers are often more accurate than estimates prepared by top managers.
3. Motivation is generally higher when individuals participate in setting their own goals than when the goals are imposed from above.
4. A manager who is not able to meet a budget imposed from above can claim that it was unrealistic. Self-imposed budgets eliminate this excuse.
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