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Accounting
by leon on March 24, 2008
Accounting tools like budgeting and sales projections can be dangerous.
According to new research out of Wharton, they can lead people astray because they do nothing in themselves to dispel biases, and can result in overly optimistic projections. The impact of budgeting in one of the studies, for examples, was trivial, improving forecast accuracy by less than two per cent. internal reporting improved accuracy by about 8.5 per cent.
The researcher Gavin Cassar is not arguing against these techniques. All he is saying is that business leaders need to treat them with some caution.
Cassar has a point. But the reality is that accounting techniques are just tools. What counts is how you use them. And some craftsmen will be better than others.
Permalink: Accounting tools and biased expectations
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Accounting tools, like budgeting and sales, can be dangerous, according to new research.
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