What is budgeting and what does the budgeting system include. Principles of Effective Budgeting

Engineering systems 26.09.2019

Engineering systems

The budget is a form of a planned report that determines the need for raw materials and materials, labor and financial resources.

The main principles of budgeting are:

1) budgetary integration (combining private budgets into common system budgets based on planned calculations)

2) the principle of consistency (the preparation of a consolidated budget takes place in accordance with a certain scheme, the initial stage of which is the sales budget)

3) use of norms and regulations

4) the principle of consolidated budgeting (the consolidated budget is based on the system of private budgeting)

5) the principle of methodological comparability (to ensure qualitative analysis and control, it is necessary to ensure the unity of methods for comparing actual and planned indicators

The scale of the enterprise affects the budgeting of the enterprise. The larger, the more complex the organizational structure and the more important the coordination between the ACs.

The need for budgeting depends on the readiness for it by management, which is determined by the goals of its activities.

Also, budgeting is influenced by the features of products and the technological process.

Operational budgets are prepared for the DH (private budgets).

At the enterprise, it is not necessary to form a complete system of budgets, everything depends on the characteristics of the enterprise's activities, and some budgets may be missing.

The complete budgeting system includes:

1) sales budget

2) production budget

3) budgets for expenses and purchases of raw materials and materials

4) labor cost budget

5) the budget for overhead costs

6) business budget

7) budget for general business or management expenses

There are the following types of budgets:

1) incremental budgets (based on growth; formed on the basis of current budgets or results of activities in previous period; the application of this method may result in inefficient activities of the enterprise as a whole and the central heating

2) budgeting "from scratch" (planned indicators do not depend on the achieved level, therefore, inefficient activities for the past period are excluded here; this method can be considered as a method of stimulating the search for alternative options for achieving the goals, makes it possible to plan in fundamentally new types - areas of activity of the enterprise )

General budget of the trade organization

The general budget includes 3 types of budgets:

1. operating budget

a. The process of drawing up an operating budget consists of several stages that correspond to a certain type or name of the budget:

i. sales budgeting phase- is determined by the capabilities of the organization (it is internal factor), but to a greater extent by the possibility of selling the goods on the market. The purpose of the budget is to calculate the volume of sales for each type of product. The sales budget is calculated according to marketing strategy organizations. The sales budget includes the following indicators (for each type of product):

1. sales plan

2. unit selling price

3. revenue

ii. preparation of the budget for the purchase of goods - is developed taking into account the available stocks at the beginning of the planning period and normalized stocks of goods at the end of the planning period. at the beginning, the need for goods is determined as the sum of the planned balances of goods at the end of the period plus the sales budget. to determine the procurement budget from general need goods, the actual stock of goods at the beginning of the planning period is deducted. this budget is compiled in natural units of measurement.

iii. cost of goods sold budgeting- cost of goods sold is defined as the sum of the cost of goods inventories at the beginning of the period plus the cost of goods purchased during the period, minus the cost inventory at the end of the period. The cost of purchased goods is defined as the sum of the direct costs of acquiring goods plus administrative selling and marketing expenses. .

iv. at this stage occurs development of a budget for administrative, commercial, marketing and other expenses in the context of individual articles for the whole enterprise and for responsibility centers. When developing a budget for commercial expenses, one should proceed from the estimated sales volume, it is also necessary to take into account the intensity of efforts to promote goods. When developing a budget for administrative (management) expenses, it is compiled according to the selected items:

1. remuneration of employees of the organization

2. insurance premiums

3. equipment depreciation

4. vehicle rental costs

5. room rental

2. financial budget

5th stage - at this stage, the result from the sale of goods is calculated; a planned profit and loss report is formed; traffic budget Money and forecast balance. The profit and loss statement includes the expenditure side (cost of goods sold, selling, administrative expenses, as well as other elements of the planned income of the trade organization). The revenue part should be planned taking into account the plan for sales of goods and the plan for other financial receipts. In addition, it is necessary to take into account the balance of funds on the balance sheet accounts of the trading organization. Income can increase due to an increase in receivables, while an increase in cash in the account does not always mean an increase in the organization's income. Definition of income statement items:

The planned profit and loss statement can be drawn up in two forms:

1) according to the direct costing system with the definition of the indicator of "marginal income"

2) at full cost

Stage 6 - cash flow budget. For an organization operating in a highly competitive environment ... the problem of forecasting is important, because the possibility of continuing the activities of the organization depends on its decision. when starting to develop a cash flow budget, it is necessary to know the availability of cash balances in the account; identify sources of cash receipts, as well as payments (articles of the organization).

3. investment budget

The need for an operating cash balance characterizes the minimum amount required to carry out activities. It is defined as the ratio of the planned amount of spending money to the planned number of revolutions.

The total amount of the average cash balance in the planning period is determined as the sum of the operating cash balance (see above), the insurance cash balance of the planning period (by multiplying the amount of the operating balance by the coefficient of variation of cash flows to the organization for certain months of the previous year), the average amount investment balance of funds, the average amount of the compensation balance (determined in the amount determined by the banking service agreement).

The forecast cash flow budget includes the following indicators:

1. cash balances at the beginning of the planning period

2. total receipts, incl. by sources of income

3. spending or disposal of funds, incl. under relevant articles

4. cash balance. In case of lack of funds, the issues of financing through loans and borrowings are considered. The balance of funds at the end of the period will coincide with the balance at the beginning of the next planning period.

5. forecast balance. The most optimal compilation method is the method that will allow you to analyze the financial condition in the planning period as much as possible.

General budget of the manufacturing enterprise

The general budget of the manufacturing enterprise also includes:

1. operating budget

2. investment

3. financial budget

In order to predict sales budget determine the influence of external factors that determine the change in these indicators at the enterprise. It is also necessary to take into account the production capacity of the enterprise.

The next stage is made production budget. Production volume \u003d product balances at the end of the period (normalized balances) + sales volume - commodity balances at the beginning of the period

Budget development material costs and procurement of raw materials and supplies. The need for raw materials and materials is determined on the basis of production volumes and consumption rates of raw materials and materials per unit of output. This calculation is carried out in natural units of measurement. Further, the plan for the procurement of raw materials and materials in kind and value terms is determined. At the beginning, it is determined the need for raw materials and supplies as the sum of planned balances at the end of the period plus the need for raw materials and materials . Purchasing volume is defined as the difference: the need for raw materials and materials minus the balances at the beginning of the planning period.

In order to determine the need for funds for the purchase of raw materials and materials, it is necessary to multiply the volume of purchases of raw materials and materials by the planned price.

Next is drawn up overhead budget. In this case, it is desirable to select variables and fixed costs. In this budget, the corresponding articles are allocated, for which control will be exercised over the expenditure of funds under this budget. In this case, the calculation procedure for each article should be prescribed.

To calculate the planned costing of manufactured products, it is necessary to allocate overhead costs using the base fixed in the accounting policy.

A consolidated pro forma profit and loss statement can be drawn up in:

1. in accordance with the form of annual reporting

2. a detailed version of the GTC, which determines the profitability of the production of a particular type of product.

TOPIC: The procedure for compiling internal management reporting

The accounting policy approves when, to whom in what volume internal management reporting is provided.

There are 3 standard time periods for internal reporting:

1. short-term reporting (for one day, week, decade)

2. mid-term reporting (per month)

3. long-term (strategic) reporting (for the year, quarter)

Classification of reporting forms:

a. comprehensive final reports (submitted for a month, quarter, six months) - contain information on the implementation of plans and the use of resources for a given period of time

b. thematic reports on key indicators are generated as deviations occur in the most important indicators for the successful functioning, included in the planned indicators

c. analytical reports - compiled only at the request of managers and contain information that reveals the causes and consequences of the results of activities in certain aspects (reasons affecting resource overruns; analysis of the use of production capacity, risk factors, etc.)

2. by management levels

a. operational reports - submitted to the heads of responsibility centers; compiled weekly and/or monthly

b. current reports - contain information for the middle level of management, incl. for profit centers and investment centers, and are compiled no more than once a month / quarter

c. summary reports - designed for higher management personnel an organization that makes strategic decisions and exercises control over the activities of the enterprise as a whole (monthly / annually)

3. by the amount of information:

a. summaries - operational information provided daily often without confirmation by data accounting

b. final reports - are compiled once a month or in another reporting period and summarize information on controlled indicators by responsibility centers

Requirements for internal reporting:

1. An internal report must be targeted and specific. It will not bring the desired results if it:

a. will not be addressed to a specific manager

2. for acceptance management decisions useful operational information

3. take into account the psychological characteristics of the manager; you need to know what form of reporting he prefers (table, graphic, etc.), what his wishes and style of work

4. Do not frequently use internal reporting forms

5. one should not often delve into the past;

6. it is more useful to provide information, the use of which will improve the work of this center; it is desirable to bring the plan / fact and deviations

7. Do not overload reporting with calculations

8. reports should cover the main thing that brings all employees closer to the implementation of plans

9. not everything is recordable, except for the preparation of written reports; it is supposed to conduct conversations of an accountant-analyst with managers of all levels

10. In any case, when drawing up internal reporting, it is necessary to be guided by the principle of economy.

11. Only controlled indicators are brought to the head of the responsibility center

Reports to higher management are not the sum of reports from lower managers.

THE MAIN BASIC APPROACH TO REPORTING IS CALLED DIFFERENCE DEPARTMENT.

Between the plan and the fact according to the variable indicator, there should be flexible budget indicators (the product of the norm by the actual volume of production).
Such management (management by deviations) contributes to:

1. Prompt detection of deviations

2. establishing those responsible for the deviations that have arisen; determination of the causes of deviations, as well as the development of measures to eliminate deviations

Internal reporting as a basis for monitoring and evaluating the activities of responsibility centers

The indicators are divided into two large groups:

1. financial indicators:

a. profit (when using transfer pricing on the principle of "cost plus")

b. profitability as the ratio of profit to revenue (to cost, etc.)

c. economic value added - can be defined as the difference between the income that a company has earned and the income that could have been received if the funds were invested in other companies with a similar level of risk

d. residual profit - profit earned by a division / responsibility center in excess of the minimum required rate of return established by the management of the enterprise

2. non-financial indicators:

a. differences between financial and non-financial indicators:

i. financial indicators are less regulated and less standardized (speed of order execution, meeting the requirements of quality standards, exceeding competitors, etc.)

ii. the connection of non-financial indicators with the final result of activity can be determined only according to accounting data, which takes a rather long time.

iii. non-financial indicators tend to lose their representativeness

iv. developing non-financial indicators is a complex task. But without its solution it is impossible strategic planning activities of the enterprise and responsibility centers. With the help of financial indicators, the results of the past activities of the AC are evaluated, non-financial indicators allow predicting the results of future work.

v. There are several rules for the combined use of financial and non-financial indicators:

1. The number of indicators must be at least 2, but not more than 6.

2. The system of indicators should contain both financial and non-financial indicators.

3. non-financial indicators must meet the following requirements:

a. there is an opportunity for the Central Organ to improve (improve) them

b. they should be supervised by the head of the AC, who takes measures to improve them

c. they should be related to financial performance

d. indicators should be interdependent and limit the influence of each other

e. new alternative indicators need to be developed if the visibility of existing criteria is reduced

Stages of building segment reporting of the organization:

1. formation of the organizational structure of the enterprise with the allocation of responsibility centers

2. coding of cost items of responsibility centers.

a. to control and evaluate the activities of responsibility centers, it is necessary to carry out:

i. classification of costs into variable, fixed, conditionally variable, conditionally fixed

ii. division of DH costs into regulated and non-regulated (or into controlled and uncontrolled). Each cost item is assigned two additional characteristics:

1. 1 – variable costs; 2-fixed costs; 3- semi-fixed costs

2. 4 - regulated / controlled costs; 5- unregulated / uncontrolled

For example, the coding of the cost item "travel expenses" for pharmacy No. 7 will look like this: 44/07/086/3.4. Let's decipher: 44 - "sales expenses"; 07 - the first level of analytical accounting, reflecting the unit (pharmacy No. 7); 086 - the second level of analytical accounting, reflecting directly the cost item; 3.4 - the third level of analytical accounting, reflecting semi-fixed costs and adjustable costs.

3. organization of planned and reporting work for each AC

Organization of the budget execution control system:

The control system is understood as a logical structure of procedures for analyzing and evaluating the activities of the enterprise as a whole and its structural divisions (CO). It includes:

1. current management decision-making at different organizational levels within the framework of a predetermined budget target.

2. Receipt from responsibility centers of information on the progress of the implementation of the budget task; analysis of current information

The control system includes:

1. Distribution of functions between management services to control budget execution:

· Economic Service- deals with the issues of monitoring the execution of current budgets by responsibility centers;

· Accounting service - performs settlement functions; collects and organizes information

· Financial service - controls the implementation of the main financial indicators; draws up interim reports on the movement of DOs and carries out activities to attract DOs

· supply service - we control the volumes, structure and prices to ensure stocks of raw materials and materials;

sales department - supervises sales

2. development of an internal document management system

3. the system of internal documents of the organization that regulate the functions of management services and the system of internal document management

Control over the execution of budgets:

carried out in the form of preliminary, current (operational) and subsequent control

o preliminary control allows you to evaluate the effectiveness of the use of resources according to indicators that are brought to responsibility centers

o current control is used in the course of execution of responsibility centers of the budget

o follow-up - carried out at the end of the budget period and is historical in nature (based on BU data). It is the deepest and most objective. This control is the final stage of the budget process, including the analysis of the efficiency of resource use.

financial accounting	Management Accounting
account number		account number



			Operating results/recording of production costs
	Material costs	30*	Account screen - material costs
	Labor costs	31*	Labor costs
	deductions	32*	deductions
	Depreciation	33*	Depreciation
	Other costs	34*	Other costs
	Expenses for ordinary activities
	Remains of wealth
	Sales	90*

Financial Accounting	housekeeping operation	Management Accounting
Sum	D	TO	D	TO	Sum
2 000			Materials credited to the warehouse		60*	2 000
			Released materials for production
			Released materials for general production needs			4 00
			Materials released for general business needs
1 480			Salary was accrued to the personnel of the organization, including:
			Main production worker		31*
			general production personnel		31*
			General staff		31*
			Payments accrued, incl.
			based on wages production workers		32*
			On wages of general production. personnel		32*
			By salary personnel		32*
			Depreciation deductions for fixed assets, including:
			By general production. objects		33*
			According to general objects		33*
			Paid for other productions. costs		34*
	X	X	Written off general costs
	X	X	Put into storage finished products
			Recognized revenue from product sales	90*
			Actual s/s of sold manufactured products written off
			General expenses written off
			Estimated balances of tangible assets (materials and WIP, GP at the end of the reporting period)	X	X
			Closing accounts, including:
			Closing a material cost account	X	X	X
			Closing the payroll account
			Closing the deductions account
			Closing a depreciation account
			Closing the Miscellaneous Costs Account
			Closing the expense account for ordinary activities

Topic 8

The OP states:

1) options for accounting and evaluation of accounting objects chosen by the organization

2) working chart of accounts of management accounting

3) forms of primary documents and accounting registers used in management accounting

4) forms of reports on central heating

5) list of ACs

6) transfer prices

7) document flow rules and accounting information processing technologies

8) the procedure for monitoring business transactions

9) other management accounting solutions

The degree of cost control for each AC is determined, as well as the selection of those responsible for the costs for each AC. The UE defines the costing items for products.

The choice of transfer prices depends on territorial location The Central Organ and is determined by the goals and objectives that are set for the Central Organ. The choice of methods for distributing indirect costs between individual objects of cost accounting and calculation.

The choice of methods for accounting for production costs and costing products

The PM defines a working chart of accounts where the following approaches can be used:

1) accounts 20-29

2) account 30-39 (costs are grouped by elements as required by external reporting). Through account 37, the costs are regrouped to cost accounts 20-29, in the necessary analytical section for the needs of management accounting

The organization independently chooses and develops forms of management accounting, which is understood as a list of applied accounting registers, the order of their construction, the sequence and methods of recording in them. The organization independently forms the structure of the management accounting, reporting and control service.

Options for organizing management accounting:

1) parallel management accounting

The autonomy of IKBFU and BUU is envisaged. First, the documents are sent to the management accounting department (financial, planning and economic). Documentation is processed for the needs of management accounting and internal reporting, and then transferred to the accounting department, where external reporting is created. This option is suitable for small companies, and is also used in organizations where the accounting function has been transferred to audit companies.

2) management accounting based on accounting

Different levels of analytics on cost accounts are distinguished and information is collected on DH, product types and costing items.

Advantages and disadvantages of management accounting based on accounting.

Advantages:

1) saving on salary

2) there is no need to create an additional service in the organization, which not only saves costs, but also eliminates unnecessary document flow

3) fewer discrepancies between accounting and management reporting

4) significant savings on automation

Flaws:

1) low data efficiency

The accountant will not make a posting until he receives a properly executed document (the document may be delayed)

2) an increase in the load on the accounting department (in order to correctly reflect the operation in the primary documents or accompanying documents, it is necessary to indicate analytical features)

3) high requirements for the capabilities of information systems and their settings

Scheme of the organization of analytical accounting for accounting accounts

Budgeting is one of the main tools for managing a company. The most "advanced" Russian enterprises are already successfully applying the budgeting procedure to plan their activities.

But, as can be seen from the results of our journal " round table»1, practitioners with experience in budgeting have questions that require clarification. What can we say about those domestic companies that are just now beginning to introduce budgetary processes. That is why our journal begins publishing a series of articles on this topic. In them, based on personal experience, the authors will talk about their vision of the problem of budgeting. At the same time, the editors will try to give an opportunity to express themselves to those who have an opinion that differs from the author's. We open a series of articles with a material about general principles budgeting.

A company that wants to succeed in the competition must have a plan strategic development. Successful companies create such a plan not on the basis of statistical data and their projection into the future, but based on a vision of what the company should become in a certain time. And only after that they decide what should be done today in order to be at the intended point tomorrow.

In the process of achieving the set goals, deviations from the given route are possible, therefore, at each “turn”, the enterprise has to calculate various options for its further actions. The tool for such calculations is budgeting.

In numerous textbooks on this topic, you can find different definitions of the concepts of "budget" and "budgeting". In this article, the author proposes to use the following terminology.

The budget is a plan for a certain period in quantitative (usually monetary) indicators, drawn up with the aim of effectively achieving strategic targets.

Budgeting is a continuous process of drawing up and executing budgets.

Consider the basic principles that you need to pay attention to the company, counting on the successful implementation of budgeting.

Three components of success

Like any procedure, budgeting should be carried out according to pre-approved rules. Therefore, first of all, it is necessary to develop and approve uniform rules on the basis of which the budgeting system will be built: methodology, design of tabular forms, financial structure, etc. It is necessary to ensure that these rules work. And here the human factor plays an important role.

Often managers budgeting setting "meet with hostility." Some perceive it simply as additional work that they are trying to impose, others fear that budgeting will reveal the shortcomings of the work of their departments, and others may not understand at all what is required of them. To force managers to execute budgetary procedures, it is necessary to use the notorious "administrative resource".

The budgeting regulations, the budget itself, the motivation system - all this must be approved by internal company orders, for failure to comply with which employees should be punished. Thus, the second component of budgeting is organizational procedures. The third key to success is automating the entire budgeting process. On the large enterprises the amount of information is huge, but no matter how significant it is, it needs to be processed in time. V modern business Nobody needs yesterday's data. It is necessary to analyze today's indicators and forecast for tomorrow, the day after tomorrow, a month ahead, etc. Automation of budgeting is, first of all, automation of planning. In fact, this is the automation of those procedures that are described in the budgeting regulations.

Final budget forms

The entire budgeting procedure should be organized in such a way that at the last stage the management receives three main budget forms:

* the budget of income and expenses;

* cash flow budget;

* forecast balance.

Some enterprises find it sufficient to draw up only one budget: income and expenses or cash flow. However, for effective planning activity of the company at the output it is advisable to receive all three budget forms. The budget of income and expenses determines the economic efficiency of the enterprise, the cash flow budget directly plans financial flows, and the forecast balance reflects the economic potential and financial condition of the enterprise. It is hardly necessary to explain to CFOs that without at least one of the three budgets, the planning picture will be incomplete.

Personal experience

Igor Govyadkin, Director for Economics and Finance of the Main Information Computing Center of Moscow

We prepare an income and expense budget and a cash flow budget. But we are not interested in the forecast balance, since we have no problems with financial stability or independence.

All final forms are completed on the basis of operating budgets (sales budget, production budget, etc.). General scheme the formation of final budgets based on operational ones can be found in any textbook on budgeting or management accounting, so we will not give it within the framework of this article. However, in one of the following articles, we will analyze in detail the process of forming all budgets using the example of a Russian holding.

It should be noted that after the budgeting of income and expenses, the budget of cash flows and the forecast balance, the planning work does not end. Firstly, the data obtained are the initial ones for management analysis, for example, for calculating coefficients. And secondly, the stage of correction, coordination, and solution of problematic issues begins. The whole budgeting process goes into the second round, and as a result, one part of the quantitative information goes into the category of "mandatory", and the other part - into the category of the next updated plans.

Efficiency - in following the principles

The principles of effective budgeting are based on common sense and are quite simple. To compare and analyze data from different periods, the budgeting process must be constant and continuous. The periods themselves must be the same and approved in advance: a week, a decade, a month, a quarter, a year. Consider the basic rules that any company involved in budgeting must follow.

The "slip" principle

The continuity of budgeting is expressed in the so-called "sliding". There is a strategic planning period, for example five years. For this period, a so-called development budget is drawn up, which should not be confused with a business plan. The business plan should contain not only quantitative information, but also the business idea, marketing research, production organization plan, etc. In principle, the financial part of the business plan is the development budget.

The five-year strategic planning period includes another period of four quarters. Moreover, such a planning period is always maintained: after the first quarter, another one is added to the fourth and again a budget is drawn up for four quarters. This is the principle of "sliding". What is it for?

Firstly, using a “rolling” budget, an enterprise can regularly take into account external changes (for example, inflation, demand for products, the market situation), changes in its goals, and also adjust plans depending on the results already achieved. As a result, forecasts of income and expenses become more accurate than with static budgeting. With regular planning, field employees become accustomed to the requirements and align their day-to-day activities with the strategic goals of the company.

Secondly, with static budgeting, the planning horizon is significantly reduced by the end of the year, which does not happen with a “rolling” budget. For example, an enterprise that once a year in November approves a budget for the year ahead, in October has plans for only the next two months. And when the budget for January appears, it may turn out that it is too late to order some resources, the application for which had to be placed three months before delivery, that is, in October.

Personal experience

Igor Govyadkin

We use a static budget because our main customer, the Government of Moscow, operates within the framework of annual budgets. But we draw up a preliminary budget for next year already in September.

Approved - do it!

Approved budgets must be executed - this is one of the basic rules. Otherwise, the whole idea of planning and achieving goals is nullified. For non-performance, it is necessary to punish, for performance - to motivate (the issue of motivation in the framework of the budgeting process will be discussed in detail in one of the following articles of this cycle)2.

Personal experience

Alexander Lopatin, Deputy General Director of Svyazinvest

When a step to the left, a step to the right of the budget is considered a crime - this is extreme. Do not be afraid to revise the budget - this is a normal process. You just need to clearly define the reasons for the change, the procedure for making changes, etc. If everything is clear to everyone, there is a regulation, then problems and questions should not arise3.

Teijo Pankko, Chief Financial Officer of Alfa-Bank

The budget is practically the law. Since we have approved it, it means that this is how we want to work. And the end result must be achieved. If something unplanned happens, then we must understand why it happened, why the set goals were not achieved, and make appropriate operational decisions4.

At the same time, as mentioned above, budgeting is primarily based on common sense. Any company can face force majeure circumstances, so the regulations should provide for a procedure for both planned and emergency budget adjustments. Ideally, the budget should include the probability of any event occurring. For this, you can use, for example, a flexible budget.

A flexible budget is based on the “if-then” principle. That is, a flexible budget is a series of "hard" budgets based on various forecasts. In the future, no matter what events occur (military conflicts, the global economic crisis, new OPEC decisions), it will not be necessary to revise and adjust the budget. It will be necessary to strictly execute the budget, which is based on the forecast that came true.

The Royal Dutch/Shell Group used flexible budgeting successfully in the 1980s. At that time, many oil companies believed that by 1990 oil prices would rise to 60-80 US dollars per barrel, and based on this they planned their development strategy. The Royal Dutch/Shell Group has developed three possible scenarios, one of them taking into account low oil prices. The real price in 1990 was $25 per barrel. The use of "flexible" planning has allowed the Royal Dutch/Shell Group to develop better than other companies in the current conditions. It is advisable to draw up a flexible budget when there are parameters that do not depend on the enterprise, but have a significant impact on the results of its activities. Such parameters can be the sales price, the volume of demand, the price of resources (for example, when the main resource is oil) and other external factors that affect the company's work.

From indicative to directive planning

How often should the budget be reviewed? The answer to this question should be contained in the regulations. Revision of the budget is the same regulated procedure as the preparation or execution of the budget. To do this, all plans should be divided into two categories: preliminary (indicative) and mandatory (directive).

The process of moving the plan from the “preliminary” category to the “mandatory” category should include certain stages: adjustment, coordination and approval. The duration of all stages is signed in the budgeting regulations. All this is necessary so that the budget is not just a plan, but a real plan for execution. You can get managers to fulfill an unrealistic budget only once, but if you demand this constantly, the manager will simply leave the company.

Personal experience Igor Govyadkin

As an indicative planning period, we have taken a year and a quarter, but the monthly budget falls into the category of directive plans.

Elena Korneeva, financial director of I.S.P.A.-Engineering

We do not draw up directive plans, only indicative ones. Even within a weekly budget. The situation is changing very quickly, and therefore we try to quickly respond to all changes. The budget cannot be monumental, it must reflect the real life of the enterprise.

towards common standards

All budget forms (tables) must be the same for all accounting centers. This is especially true for holdings, which include various enterprises. If each factory will use its own forms, then the financial service management company the bulk of the time will be spent on data consolidation, and not on planning and analyzing the results.

The procedure for filling budgets for different enterprises holding, as well as at the levels of financial responsibility centers within enterprises. Accordingly, the deadlines for submitting budgets by the holding's subdivisions to the management company should also be the same.

Cost Detailing Principle

In order to save resources and control the use of funds, all significant costs should be itemized. The author recommends detailing all expenses that exceed 1% of the total share of expenses, although the size of the company should also be taken into account. The point of detailing is to prevent managers of costly units from profiting at the expense of the company.

The directive part of the budget should be much more indicative and have the highest possible level of detail.

The accounting period can also be detailed. For example, the income and expenditure budget can be detailed by months, and the cash flow budget can be detailed by weeks or even banking days, since control over financial flows requires greater care and efficiency.

The principle of "financial structure"

Before introducing budgeting, an enterprise needs to create a financial structure, which can be built according to other principles than the organizational structure. Some divisions can be combined into a single financial accounting center. Conversely, within the same division, different accounting centers can be distinguished (for example, by type of product or activity).

Depending on the category of the accounting center (be it a profit center or a source of costs), various systems of criteria should be developed to evaluate the performance of these units.

Having developed a financial structure, the enterprise will identify the number of levels of collection of budget information5 and, depending on this, will be able to create a budgeting schedule for each accounting center.

"Transparency" of information

The successful setting of budgeting in a company directly depends on how well employees understand the essence and usefulness of this event. And it is up to the CFO to explain this.

To eliminate the possibility of distortion of information and strengthen control over the execution of the budget, the specialist analyzing the data of the final budget forms needs access to the budgets of each accounting center, as well as to the operating budgets within the accounting centers themselves, down to the lowest level. In addition, he should have information about the stage of budgeting at all lower levels. And if some department submitted the budget later than necessary, then the financier responsible for budgeting should receive information in a timely manner about the reasons why this happened. Therefore, constant monitoring of the budgeting process at all levels is necessary. In automated budgeting programs, such monitoring is easy to carry out, it is much more difficult to do this if budgets are formed in conventional spreadsheets.

Towards effective budgeting

All procedures and principles described above should be reflected in the “Budgeting Regulations” that is uniform for the entire company. This document should define the procedure for coordinating budgets and their consolidation, forms of documents, workflow schemes, as well as the timing of consideration and decision-making at all levels of collecting budget information.

It must be remembered that budgeting is a big system task. But, despite the difficulties that arise in the course of its solution, one must try to adhere to the principles described above.

At a certain stage in the development of each enterprise, without exception, there comes a moment when the issue of work efficiency comes to the fore. This does not necessarily have to be preceded by some kind of crisis, it’s just that the company reaches a level where further development cannot be achieved by increasing the scale of the business and increasing operational performance. Therefore, companies are beginning to pay more attention to internal resources and the productivity of their own work with the help of various individual and classic performance management tools.

Budgeting as one of the leading management tools focused on the economic efficiency of an enterprise can have a tremendous effect on a business if budgeting itself, as a process, is well structured, works as a productive system and is implemented by a professional team. About what is the main benefit for business from budgeting, what kind of tasks this management tool allows you to decide what are the main methods of budgeting today are most common in enterprises, and what advantages each of the approaches can provide the company - we will consider in this article .

Financial planning and budgeting in modern business conditions

The coming of companies to the realization of the need for high-quality management of their own resources is due to the widespread, penetrating at all levels, increased competition.

Previously, competition was local in nature, and the slowness of information exchange due to the low technical development of mankind allowed companies to stay afloat not due to some specific, regular achievements (or, to put it more simply, efficiency), but simply because there was no such system of prerequisites, which could quickly “take away” business from its position.

To put it simply, it was possible to work in general in a way that was convenient, provided that the main and even the only function was performed - meeting the needs of customers.

We are talking about the fact that the issue of competition and the risks generated by it was not so acute. As long as you are alone in the market, as long as information exchange is difficult, and the buyer cannot even theoretically recognize / reach the competitor's company - you, in general, are not in danger. In fact, the whole market process at the dawn of the technical revolution rested on this.

Today the world has become completely different. Everything has changed, from the speed of decision-making, geography and opportunities, to the fundamental attitude of people to the suppliers of goods and services they turn to. Therefore, such a question as the combination of a continuous increase in the company's competitiveness while simultaneously obtaining by the management (using various tools *) the maximum profit from the business, comes to the fore in companies of any size, in any field of entrepreneurial activity.

*Against this background, budgeting as a financial instrument becomes integral part a constant management cycle in companies, since the presence of resources in the company and changes in their parameters make it necessary to manage these resources by itself. And on how well the management of resources is carried out (by resources we mean not only some commodity values, but by and large everything that a company possesses or can attract from outside, and what it can manage to increase its productivity), the present and the future of any firm.

Budgeting as is

Probable business prospects can only be assessed on the basis of "control measurements" of results at all stages of work. Therefore, business at all times is associated with planning, which in turn is built on the basis of forecasts, expectations, or some kind of theoretical calculations. From all this, a certain plan* is formed, according to which entrepreneurs act in order to achieve a certain result.

*This is how subject budgeting appeared - as a separate management system that includes planned and regulatory metrics for individual areas of work and departments, as well as all useful target information.

The latter is necessary for managers to find ways to optimize, calculate and determine corrective measures for strategic goals, set goals and implement a strategy for continuously increasing business productivity in the face of increased competition, financial crises and a general change in the global economic model.

This information and indicator system is used at all levels of the organization for internal production management of resources through the control of planned income, expenses, processes, assets, liabilities and opportunities, which are reflected in various combinations in those documents called "budgets".

Budgets are interconnected and are nothing more than a reflection of the plans for the production and financial activities of the organization, which allow you to manage the parameters and characteristics of income and expenses, analyze the current state of the company, manage the results of processes and integrate planned values into production chains in a way that ensures maximum desired effect for the business.

Budgeting of any enterprise has a certain set of properties:

Budgeting is a continuous process that involves all departments of the company, which are responsible for income and expenses in any possible way.
The ultimate goal of budgeting is not a statement of fact, but the availability of results, therefore, participants in the budget process, as a rule, are motivated to execute their budgets in accordance with the goal of performance.
The financial structure of the enterprise, consisting of financial responsibility centers, is not static and is constantly being improved to ensure maximum productivity, both for the budget process and for the enterprise as a whole.
The process of budgeting and budget management is divided into many interrelated components of planning, control, execution, analytics and management.
The budgeting process is standardized and regulated, which forces all participants in the budgeting process to act within the same parameters and similar frameworks.
Budgeting initially assumes the variability of scenarios for the implementation of the planned plans and provides for various opportunities for managing such changes.
Budgeting concerns all areas and areas of the organization's work: either budgeting works for the entire organization, or it does not work at all.
Budgeting is focused on achieving specific measurable goals.

Figure 1. Budgeting properties.

The listed properties of budgeting largely determine the main functions that budgeting in a company performs in a substantive sense.

Resource planning. As the main resource planning tool, budgeting ensures the vital activity of the company and the movement of all its processes. It is impossible to imagine any working production cycle in which there is absolutely no budgeting, since such a system simply could not exist. Budgets solve not only the problems of resource allocation, budgets themselves become a reflection of any measurable tasks, since all the costs of any action today have a monetary measure of expression. Resource planning through budget processes indirectly affects the strategic aspects of the business and directly affects the efficiency of operations.
Forecasting prospects. Budget work as a function allows the company to most accurately predict its resource and financial prospects, thus increasing the efficiency of task formation in actual business activities.
Analysis. "Where are we and why are we here?" - a question that management helps to answer budget system. Good business is always a business based on analytics. And in order for this analytics to be understandable and as productive as possible, budgets embody a combination of various standards, indicators and criteria that management operates to draw up an analytical picture and develop measures to improve efficiency. Budgets allow you to continuously monitor indicators with almost any level of detail, see in time where the deviation from the plan began and make informed decisions about correcting actions.
Accounting and reporting. Clear control of the quantity and composition, type and fact, conditions or combinations of any measurable values of the company's management accounting.
Control. In the issue of control, budgeting operates with a set of metrics and indicators by which management continuously monitors the state of the company in all areas of activity.

Figure 2. Budgeting functions.

Tasks of budgeting in the enterprise

The properties of budgeting and its subject functions together allow us to compile a list of tasks that the budgeting system can solve in an enterprise:

A system of continuous subjective assessment of the enterprise is being formed, broken down into divisions (CFD) and even constituent parts of business processes.
The goals of the company acquire a fact-based character, which means, on the one hand, they become more achievable, on the other hand, the most understandable.
The company forms a system of long-term, medium-term and short-term plans, each of which is supported by a certain set of budgets.
The control function becomes interconnected with planned and actual indicators, which means that it cannot be biased and biased.
A chain of resource flows arises at the enterprise, the management of which is a separate topic for managerial optimization.
The company's team becomes focused on achieving understandable measurable goals, on which the personal motivation of each depends.
The budget system helps to create a fully interconnected system management, which can correct a single section of the business system.
The analytical function of the budget system allows you to make changes at the stage of occurrence of deviations, and not on the fact of non-fulfillment of plans.
The enterprise as a whole becomes more manageable, understandable and predictable, which is especially important when management is carried out by a hired team of specialists.

With the understandable productivity of budgeting for a business, it also has a number of serious limitations that affect a particular enterprise:

The high cost of the budgeting system itself and the complexity of implementing such a system in an enterprise. It is clear that a system that benefits the company cannot be cheap, and it is possible to compile such a system on a very limited scale. This factor limits the horizons of using budgetary processes.
Insufficient management qualifications do not allow one hundred percent to reveal the potential of the budget system, since employees do not receive an acceptable level of access to budget information and perceive the system not as an assistant, but only as a measure of control and a basis for possible sanctions. That is, budgeting is turning from a system of improving efficiency into a system of supervising the work of employees (at least in the view of the latter).
An insufficiently thought-out budgeting system reacts extremely painfully to making any changes to it and may turn out to be inoperative in this case.

What are the main methods of budgeting

After we have considered the issues of the validity of the introduction of budgeting in companies, let's move on to such a question as budgeting methods in an enterprise.

Of course, over the years of the development of financial management and the possibilities of technical progress layered on it, the principles and methods of budgeting in companies from micro to macro sizes have repeatedly undergone various changes.

Suffice it to say that each company has an individual budget planning methodology that meets its strategic goals and operational objectives, and may be completely different from the examples we know.

Therefore, no matter how theorized this issue, it is worth noting that budgeting in an enterprise is always a separate area.

Despite this, any budget system must use a certain set of methods that help solve certain business problems. The very tasks that business is forced to face at the intersection of operational activities and budget planning determine the set of methods used in budgeting. So all the same, what are the main methods of budgeting?

There is no single answer to this question: there is a certain set of classical methods, which we will consider below. But before that, it is helpful to take a closer look at the tools in the fiscal management framework that help CFOs ensure the effectiveness of the budget process:

Planning Tools. A grouping of various tools responsible for planning activities, resources or opportunities, due to which companies have a set of combined and interrelated goals at all levels.
Control tools. Budgetary levers that allow to produce required amount checks of compliance of results and planned values. This is especially important in companies that may be affected by market changes.
Accounting tools. They allow you to control the availability and consumption of a particular type of resources, giving you the opportunity to get a complete picture of the current state of the enterprise in various sections.
Analytical Tools. Designed to help increase efficiency and show management ways to make the most productive use of existing or potential resources.
Forecast tools. A group that allows you to use the accumulated information to make reasonable forecasts. It is important, first of all, in order to increase resistance to various changes in companies.
Mathematical levers help to perform complex calculations that can demonstrate to management the capabilities or weaknesses of the company's business, both in terms of prospects and operational obligations.
It is reasonable to include here the subgroup statistical tools, since statistics are usually based on calculations.

Figure 3. Tools for effective budgeting.

From the individual set of strategic tasks, operational goals, these tools and the business opportunities arising from their use, a combined budget system and a virtual (planned) business model are formed in the company, which is expressed in the form of the most important management tool - the budget.

Budgets at enterprises are different, and it depends, firstly, on the size of the site covered by this budget, and secondly, on the function that the budget performs:

The main budgets are the budgets of income, expenses and cash flow. These budgets reflect the planning and execution of the main income and expenditure operations of the company. Containing only financial data, they are populated documents that reflect the company's global perspective.
The second most important are the operating level budgets - cost budgets, production regulatory plans, marketing and sales budgets, tax and personnel expense funds and other budgets of this level. All these data from the bottom up fill the main budgets and show the management all the actual indicators for the departments, depending on whether it is profitable or expenditure.
The third (not in importance) are the budgets for investments, attraction of funding and other auxiliary budgets. These budgets supplement those mentioned above with their capabilities or detailing of certain information, for example, by periods of attracting credit money in the case of considering a funding budget.

When developing each of the budgets, financial management or the department that owns the budget can use one of the most common approaches to generating data to fill the budget:

First approach is based on a so-called "growth" or summation, and means that future budgets are based on adjusted historical data. Management typically takes the numbers and predictively derives new values for the future period, taking into account the combined price adjustments, market factors, and other changes that may affect the firm in the future. The problem with this approach is that the future budget is not always (especially in current time in the world) is based on the prospect of growth in indicators, but on the contrary, it is forced to be adjusted downward. Also, if any managerial management error was included in the budget of one of the previous periods, it is very likely to flow from the old budget to the new one.
Second approach is based on the formation of a certain starting point at which the firm or its separate division in principle exists (conditionally zero) as an economically justified structural unit. The problem with this method is that it can generate unnecessary competition, when departments of the company or its structural units begin to senselessly compete with each other, trying not to show their effectiveness by deeds, but to demonstrate the validity of their existence with “drawn” budgets, for example, too low, but attractive an inexperienced manager with its economy. This method allows prioritization, but requires huge amount time to evaluate the main version of such a budget and integrate into it all additional data that will reflect the change in such budget plan with the growth of production, sales, geography and other parameters of operating activities.

Objectively, at detailed consideration and subject to a clear control of managerial errors, the first method of formation by growth is the most convenient for small and medium-sized businesses.

Based on the specifics of budget management discussed above, approaches to generating data for budgets, tools, functions and features in modern system financial management, the main methods of budgeting have been formed:

From the lowest level to the highest level

When lower-level performers pass information up the hierarchical chain to the top management of the company, at each level accepting only a limited number of indicators, but mostly passing the information on for approval above. The limitations of this method are related to the human factor, when the manager corrects the data not objectively, and the subordinate overestimates or underestimates the data intentionally.

From the top level to the bottom level

Directive method - management decides, and subordinates execute. This is perhaps the most common method of budgeting, since the opinion of the company's management is always put at the forefront, contrary to any logic. Of course, this method is more objective, since the company's managers have great opportunities on the correct interpretation of strategic plans and operational tasks in a realistic way, which subsequently provides opportunities for monitoring what was conceived at the level of the company's management. Also distinctive feature This method can be called the initial consistency of budgets at different levels, since their values are determined immediately, and adjustments are in the nature of requests.

Combined method of different levels

The most productive approach and the most democratic method of budgeting. Its essence lies in the joint work of management and subordinates. Its goal is to formulate the most balanced budgets, which, on the one hand, will meet the ambitions of the management and the objectives of the company, and on the other hand, will be assistants and motivators for line personnel responsible for specific operational results. By using this method, even at the planning stage, the very subject of possible disagreements is eliminated, and the parties work in tandem, ensuring the maximum degree of efficiency.

Figure 4. Budgeting methods in the enterprise.

Unfortunately, it is impossible to consider budgeting methods in isolation from the very essence and specifics of modern business budgeting, since budgeting methods are only one component large iceberg of financial management, and it is important to take into account the specific conditions and internal currents of a particular organization. It is more correct for some companies to use traditional budget routes from management to personnel (for example, at enterprises of a production complex), for others, for example, scientific companies, it is logical to listen to the lower levels of budget owners and plan based on their opinion. The third grouping of companies manages to use the synergistic effects from the interaction of managers and performers, achieving the desired result.

Therefore, in conclusion, I would like to note once again that the methods of financial planning and budgeting will directly depend on what exactly your unique company is and what goals you set for it.

CFO
No. 5, 2002

Budgeting is one of the main tools for managing a company. The most "advanced" Russian enterprises are already successfully applying the budgeting procedure to plan their activities. But, as can be seen from the results of the "round table" held by our journal, practitioners with budgeting experience have questions that require clarification. What can we say about those domestic companies that are just now beginning to introduce budgetary processes. That is why our journal begins publishing a series of articles on this topic. In them, based on personal experience, the authors will talk about their vision of the problem of budgeting. At the same time, the editors will try to give an opportunity to express themselves to those who have an opinion that differs from the author's. We open a series of articles with a material on the general principles of budgeting.

A company that wants to succeed in the competition must have a strategic development plan. Successful companies create such a plan not on the basis of statistical data and their projection into the future, but based on a vision of what the company should become in a certain time. And only after that they decide what should be done today in order to be at the intended point tomorrow.

In numerous textbooks on this topic, you can find different definitions of the concepts of "budget" and "budgeting". In this article, the author proposes to use the following terminology.

Budget is a plan for a certain period in quantitative (usually monetary) indicators, drawn up with the aim of effectively achieving strategic targets.

Budgeting It is a continuous procedure for drawing up and executing budgets.

Let's take a look at the main principles that you need to pay attention to.

companies looking to successfully implement budgeting.

Three components of success

Quite often managers budgeting statement "meet with hostility". Some perceive it simply as additional work that they are trying to impose, others fear that budgeting will reveal the shortcomings of the work of their departments, and others may not understand at all what is required of them. To force managers to execute budgetary procedures, one must use the notorious "administrative resource".

The budgeting regulations, the budget itself, the motivation system - all this must be approved by internal company orders, for failure to comply with which employees should be punished. Thus, the second component of budgeting is organizational procedures. The third key to success is automating the entire budgeting process. In large enterprises, the volume of information is huge, but no matter how significant it is, it needs to be processed in time. In today's business, no one needs yesterday's data. It is necessary to analyze today's indicators and forecast for tomorrow, the day after tomorrow, a month ahead, etc. Automation of budgeting is, first of all, automation of planning. In fact, this is the automation of those procedures that are described in the budgeting regulations.

Final budget forms

The entire budgeting procedure should be organized in such a way that at the last stage the management receives three main budget forms:

income and expenditure budget;
cash flow budget;
forecast balance.

Some enterprises find it sufficient to draw up only one budget: income and expenses or cash flow. However, for effective planning of the company's activities, it is advisable to receive all three budget forms at the output. The budget of income and expenses determines the economic efficiency of the enterprise, the cash flow budget directly plans financial flows, and the forecast balance reflects the economic potential and financial condition of the enterprise. It is hardly necessary to explain to CFOs that without at least one of the three budgets, the planning picture will be incomplete.

Personal experience

Igor Govyadkin, Director for Economics and Finance of the Main Information Computing Center of Moscow

We prepare an income and expense budget and a cash flow budget. But we are not interested in the forecast balance, since we have no problems with financial stability or independence.

All final forms are completed on the basis of operating budgets (sales budget, production budget, etc.). The general scheme for the formation of final budgets based on operational ones can be found in any textbook on budgeting or management accounting, so we will not give it within the framework of this article. However, in one of the following articles, we will analyze in detail the process of forming all budgets using the example of a Russian holding.

Efficiency - in following the principles

The "slip" principle

First, using a "rolling" budget, an enterprise can regularly take into account external changes (for example, inflation, demand for products, the market situation), changes in its goals, and also adjust plans depending on the results already achieved. As a result, forecasts of income and expenses become more accurate than with static budgeting. With regular planning, field employees become accustomed to the requirements and align their day-to-day activities with the strategic goals of the company.

Secondly, with static budgeting, the planning horizon is significantly reduced by the end of the year, which does not happen with a "rolling" budget. For example, an enterprise that once a year in November approves a budget for the year ahead, in October has plans for only the next two months. And when the budget for January appears, it may turn out that it is too late to order some resources, the application for which had to be placed three months before delivery, that is, in October.

Personal experience

Igor Govyadkin

We use a static budget, because our main customer - the Moscow City Government - works within the framework of annual budgets. But we draw up a preliminary budget for next year already in September.

Approved - execute!

Personal experience

Alexander Lopatin, Deputy General Director of Svyazinvest

Teijo Pankko, chief financial officer of Alfa-Bank

Flexible budgeting is done on an "if-then" basis. That is, a flexible budget is a series of "hard" budgets based on various forecasts. In the future, no matter what events occur (military conflicts, the global economic crisis, new OPEC decisions), it will not be necessary to revise and adjust the budget. It will be necessary to strictly execute the budget, which is based on the forecast that came true.

The Royal Dutch/Shell Group successfully used flexible budgeting in the 1980s. At that time, many oil companies believed that by 1990 oil prices would rise to 60-80 US dollars per barrel, and based on this they planned their development strategy. The Royal Dutch/Shell Group has developed three possible scenarios, one of them taking into account low oil prices. The real price in 1990 was $25 per barrel. The use of "flexible" planning has allowed Royal Dutch/Shell Group to develop better than other companies in the current conditions. It is advisable to draw up a flexible budget when there are parameters that do not depend on the enterprise, but have a significant impact on the results of its activities. Such parameters can be the sales price, the volume of demand, the price of resources (for example, when the main resource is oil) and other external factors that affect the company's work.

From indicative to directive planning

The process of moving the plan from the category "preliminarily" to the category "mandatory" should include certain stages: adjustment, coordination and approval. The duration of all stages is signed in the budgeting regulations. All this is necessary so that the budget is not just a plan, but a real plan for execution. You can get managers to fulfill an unrealistic budget only once, but if you demand this constantly, the manager will simply leave the company.

Personal experience

Igor Govyadkin

As an indicative planning period, we have taken a year and a quarter, but the monthly budget falls into the category of directive plans.

Elena Korneeva, financial director of the company "I.S.P.A.-Engineering"

towards common standards

All budget forms (tables) must be the same for all accounting centers. This is especially true for holdings, which include various enterprises. If each plant uses its own forms, then the financial department of the operating company will spend most of its time on data consolidation, and not on planning and analyzing results.

The procedure for filling budgets at different enterprises of the holding, as well as at the levels of financial responsibility centers within enterprises, should be the same standard and based on a single methodology. Accordingly, the deadlines for submitting budgets by the holding's subdivisions to the management company should also be the same.

Cost Detailing Principle

The directive part of the budget should be much more indicative and have the highest possible level of detail.

Principle of "financial structure"

Depending on the category of the accounting center (be it a profit center or a source of costs), various systems of criteria should be developed to evaluate the performance of these units.

Having developed the financial structure, the enterprise will identify the number of levels of collection of budget information and, depending on this, will be able to form a budgeting schedule for each accounting center.

"Transparency" of information

Towards effective budgeting

All procedures and principles described above should be reflected in the "Budgeting Regulations" uniform for the whole company. This document should define the procedure for coordinating budgets and their consolidation, forms of documents, workflow schemes, as well as the timing of consideration and decision-making at all levels of collecting budget information.

It must be remembered that budgeting is a big system task. But, despite the difficulties that arise in the course of its solution, one must try to adhere to the principles described above.

The main thing is to understand what budgeting is for.

Interview with Financial Director of Ekonika Corporation Vladimir Borukaev

How long has your company been using budgeting?

When we started doing business, we, like many other companies, did not even think about introducing budgeting. Then, in 1993-1994, we began to carry out planning in the classical form in which it is meant. Implemented budgeting step by step. Some sections could be introduced intensively, some - gradually.

What should first of all be paid attention to by financial directors who are going to introduce budgeting at their enterprises, where to start?

In my opinion, when implementing budgeting, the main thing is to understand the essence of the process. If a person does not understand the process, it will be just numbers. Management should monitor performance for each budget item. If they have changed, you need to understand why this happened.

Does your company have a system of motivation, responsibility of managers for the execution of the budget? What are the penalties, bonuses?

And there are penalties and bonuses, of course. But there is no direct, clearly defined dependence of them on the execution of the budget. In our company, each manager is responsible for his department and the final result he receives. It is impossible to encourage or punish for the execution or non-execution of one budget item, especially in the short term, without understanding the process as a whole. It is necessary to understand the reasons that do not always depend on the person responsible for the budget line.

The sales budget is often cited as one of the most difficult to both plan and execute. How is it compiled in your company?

The sales budget is formed on the basis of the goals that are planned for each division. For each source of income, a marketing plan, on the basis of which the volume of sales is forecasted.

And on what basis are these plans formed? Are they descended from above by the leadership or are they initiated by the units themselves?

The management company determines the strategic goals and development directions of the holding as a whole, and the subsidiaries, in accordance with them, independently form their own product and marketing strategies and plans, which are then approved by the Board of Directors.

During the "round table" on budgeting, which was held by our magazine, among others, questions were raised: how should a financier control technical services, how to check the reality of the numbers in their budget requests? What do you think about it?

When approving write-off rates, we first look at the existing statistics of the costs that we want to rate. Moreover, several people usually participate in the development of standards, for example, the heads of the transport service, the logistics department. In addition, an auditor or an independent consultant is also involved in this process, which gives an opinion. The standard is approved by a special commission.

At what point does an enterprise need to introduce budgeting, because it is no secret that many companies still do without it?

If this is not a one-time transaction, then planning is already required, at least in terms of large indicators. If the business has a long history, then you need to calculate everything more accurately and seriously. Although some heads of organizations believe that "the money goes to itself and goes, why do we need planning, budgeting." Typically, this approach ends up hurting the business.

Cost budgeting. In a market economy, cost management in an enterprise is closely related to financial management. This is achieved by cost budgeting, i.e., building a system of budget planning, control and analysis of costs and financial resources at the enterprise. Implementing resource budgeting provides a number of benefits:

Planning the budgets of structural units gives more accurate estimated volumes and cost structure;

The approval of monthly (quarterly, annual) budgets provides structural units with greater independence in spending the wage fund, which increases the material interest of employees in the successful implementation of planned targets;

Simplification of the control system of budgetary funds allows to reduce unproductive expenses of the working time of the economic services of the enterprise;

A stricter regime for saving costs and financial resources of the enterprise is being introduced, which is especially important for overcoming the economic crisis.

The budgeting system at the enterprise covers both production units and functional services (departments) and units of the non-industrial group.

Budgeting the costs of structural units is expedient within certain limits.

For production units of the main production, whose activities depend on the volume of production and sales of products (works, services) of the enterprise, it makes sense to establish budgets for the costs of implementing individual contracts (projects). Approval of the general cost budget for such units justifies itself under stable production and sales conditions, which are rarely observed in practice. In conditions of instability of production volumes and sales of products, it is best for the production units of the main production to establish an estimated cost standard per unit volume of production (works, services). It is possible to normalize both the total cost per unit of output and the costs of using certain types of resources (wages, material costs, energy resources, and others).

Budgeting, essence, methodology and application procedure.

Budgeting is the process of planning the future activities of an enterprise, the results of which are documented by a system of budgets. Depending on the goals set (strategic or operational planning), the budget is drawn up for various periods - a year, half a year, a quarter, a month, a decade, a week, etc. - and with different depth of study.

Typically, the creation of budgets is carried out as part of operational planning. Based on the strategic goals of the company, the budgets solve the problems of distribution of economic resources at the disposal of the organization. The development of budgets gives quantitative certainty to the chosen prospects for the existence of the firm.

In the general case, in the process of budgeting, the services and departments of the organization are brought to the control figures of the proposed allocation of resources for the period of interest. These structures form their own budgets (primary budgets), based on the goals and available resources, and then submit them for approval and approval. Agreed primary budgets are the blocks from which the draft budget of the entire organization is built. To ensure follow-up control, forecasts and plans, on the basis of which budgets are developed, and their subsequent changes should be stored in the system with the mandatory registration of the responsible person.

In the process of approval, individual articles are settled and accents are redistributed.

Budget execution is the longest and most responsible of all stages of budgeting. Here, the budget can undergo various adjustments depending on changed external conditions or internal needs: resources are redistributed and reduced, budget items are proportionally reduced, the budget is changed according to specially described algorithms, etc.

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What is budgeting and what does the budgeting system include. Principles of Effective Budgeting

Financial planning and budgeting in modern business conditions

Budgeting as is

Tasks of budgeting in the enterprise

What are the main methods of budgeting

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