Question

Should managers overstate budget requests (or growth projections) if they know that central headquarters is going to cut funds across the board?

answer by following this guideline: what will happen if central headquarters s going to cut funds across the board? then give reasonable reasons why managers should not do that, explain what will be the good options to do.

PS: you can also add your own reason as long as it make sense

Answer 1

Every project includes a projection of funds required which is generally known as a budget. A budget must be prepared carefully keeping in mind all the major and minor details relevant for the preparation of the same. A full understanding of the budget planning and preparation system is essential.

A budget must be prepared keeping in mind the financial feasibility of the organisation. If the managers overstate budgets, it will create undue pressure on the senior officials/headquarters. So an ideal budget must be prepared in order to keep co-operation between the managers and the headquarters.

If the managers are sure that the headquarter will cut off funds even when they ask for reasonable amount, then the managers can keep a reasonable margin while preparing the budget. But this shall only be done in the scenario when the managers are sure that the funds will be cut off in future.

Managers should also not overstate the budgets on a regular basis as this will create a negative impact on the top level management and will surely cut off the fund allocation.

Thus in my opinion the managers should carefully and precisely prepare the budget with ideal figures which shall also not create any pressure on the headquarter and they will also have no reason to cut off the fund allocation.