Communication is fundamental in the budgeting process and in the organization where I work the budgeting process involves simultaneous efforts of the top management and subordinates. Here a few factors I believe may affect the magnitude of budget estimates. First, the estimation method used by employees; second, what will be communicated to the top management; and third, top management must combine the estimates of employees while considering the information at hand and their own likelihood estimates of possible outcomes. Thus, the budget will be viewed as one of two possibilities: flexible, to allow for unexpected events or a best point estimate of what is likely to occur.
Consequently, as with most things in managing an organization; budgeting process needs to be driven by the vision of the organization and a very effective communication of the strategic plan. I truly believe that if my organizations stay focused on strategy plan we will know exactly where we want to spend our resources and have a plan to help keep us from spending in areas that do not line up with the vision.
Finally, I would like to mention that our organization is a customer related
References: Jackson, S. R., Sawyers, R. B. & Jenkins, J. G. (2009). Managerial Accounting: A Focus on Ethical Decision Making. Mason, OH: South-Western. Otley, D. T. (1987). Accounting Control and Organizational Behaviour. Uk. Cima Pub, 1st Ed.