What is the main purpose of budgeting? Why is this process carried out? What is it for? What tasks are performed? What is the essence of this process? How does the overall system work? These, as well as a number of other questions, will be answered in the framework of the article.
Introductory information
Budgeting is a tool for changing the activities of the enterprise. What is this process? He is engaged in the management of the financial and economic status and activities of the enterprise. This is done through the budget management system, in short - SBU. Its importance is often underestimated. And in vain. But we will return to this. Through careful preparation, budgeting goals are achieved. The stages of budget development include planning, accounting, analysis and monitoring of the state of the enterprise. The main object of influence is the ongoing activity. Thanks to budgeting, its main features are changing. For example, the characteristic is the delegation of responsibility to the subjects of the process in the enterprise.
Targets and goals
Budgeting should work to increase the efficiency of expanded reproduction of capital in the enterprise. The commercial structure is considered as an object of the process. This is the main goal. Budgeting is a complex process, for the successful completion of which it is necessary to perform a number of tasks. These are:
- Definition of objects and subjects.
- Development of a classifier of articles, their relationship with the factors of reproduction of capital, a breakdown into direct / overhead and constant / variables.
- Determination of the financial structure (if necessary, together with the design and process).
- Development of regulations for coordination and subsequent cash payments.
- Determining the factors of capital reproduction and establishing their relationship with budget components.
- Development of an article classifier according to the balance sheet.
- Development of management accounting policies.
- Development of regulations affecting the creation, control, adjustment and analysis of enterprise budgets for annual, quarterly, monthly and weekly planning.
- Automation SBU.
- Development of budget forms for objects.
In conclusion, compilation of the initial balance and the subsequent launch of the SBU.
Organizational moments
It is difficult to achieve the goal of the budgeting process if there is no order. In achieving the necessary conditions, the organization significantly helps. In short, the following steps should be distinguished:
- Staging. The provisions of the budget management system are being developed.
- Implementation. Changes in the activities of the enterprise through the implementation of previously developed provisions of the SBU. In this case, it is necessary to distinguish between formal directive implementation and practical creation, when the system becomes an integral element of the process of employees.
- Automation. This phase is being implemented in parallel with implementation. It represents the installation, configuration and commissioning of an automated budget management system.
Using the software package
The purpose and objectives of budgeting is much easier to achieve if you use new technologies. Let's look at what the most popular options offer:
- Programs 1C. Their main task is automation of accounting. But the complex can also be used in solving problems with budget management. Although it should be noted that for the possibility of use it is necessary to make adjustments, in addition, there are specific differences compared to accounting. Although to be honest, it is better to recognize the 1C platform as a standard for budget automation.
- Intalev programs. Popular developments that attract not only a good product, but also well-developed methodological manuals and books that allow you to get a theoretical understanding of the system and facilitate its setup. In addition, it is possible to exploit elements related to managerial accounting in budgeting within the framework of one complex. True, there are disadvantages. For example, there is no standard convenient procedure for importing data, and there is no built-in economic and mathematical subsystem. In other words, there are no tools for optimization.
- Kubexpert. This program provides very flexible options for customizing the enterprise budget system. Particularly noteworthy is the convenient procedure for importing data from various accounting systems, while configuring them on the fly. Although there is still no subsystem of economic and mathematical modeling.
- MS Excel. A classic present on almost every computer. With the advent of PowerView and PowerPivot tools in version 2013, this program can be used for automation not only at the initial level.
There are other software options that are used by organizations.
About examples
The purpose of budgeting is to increase efficiency. How is this manifested? Consider the situation with a banking institution. Budgeting in this case in the first place can be characterized by a specific cycle of capital reproduction. This situation leads to the emergence of unusual from the classical point of view, areas of activity. As a result, the value is created and redistributed within the bank.
A special role in fulfilling tasks and achieving goals is played by risk management. So, the optimization of the bank should take into account not only the budget, but also potentially dangerous moments in the activities carried out (non-repayment of loans issued). Budgeting is also closely related to costing. After all, this process allows you to find out the cost of a particular product depending on the adopted organizational and technological decisions. Costing is useful for budget departments, projects, products and processes. But do not forget about financial planning. It is also of interest to the SBU. The budget management system can be considered as a financial planning tool.
But one should not think that this is the only thing that is limited. Budget management is not limited solely to the maintenance of financial planning. It is precisely a tool with which you can calculate the condition in the future. Moreover, the proposed actions relate not so much to finance as to the economy. SBU is a tool that allows you to implement calculated plans due to the impact on the activities of people who work in the enterprise.
About communication with other systems
It is impossible to speak about successfully achieved budgeting goals at an enterprise if the work is carried out only with a separate direction. What should you pay attention to? The essence and objectives of budgeting require primary attention to the system of motivation and development of personnel. It is necessary to ensure that participants in the process have responsibility. This is best done using a staff motivation and development system.
Secondly, attention must be paid to automation capabilities. This is due to the fact that budgeting in full is very cumbersome. And its implementation without automation will turn into a very costly affair.
Thirdly, it must be remembered that increased responsibility must be accompanied by delegation of authority. It is necessary to clearly draw the whole system, strive for a link between various posts and people. All this should be implemented as part of the process management system. And fourthly, it must be remembered that the company is not just interested in creating budgets. They should not exist simply to be for their own sake. Budgets have a specific goal - to optimize activities. To obtain useful information, and not just shifting pieces of paper, it is necessary to use reliable data in economic and mathematical models, and then make the necessary management decisions.
It should also be remembered that the goals of the budgeting system will be achieved better if the operational-tactical tasks are associated with strategic leadership. If we manage to realize a close relationship between the various elements, then for optimal development we will only have to take one step - to create a unified enterprise development management system.
How do changes manifest?
SBU actively uses the mechanism of delegation of responsibility and authority. But the question is - to whom? Attention must be paid not only and not so much to the top management, as to the heads of departments and below. Even individual workers need not be ignored. How is this implemented? Organizational changes at the directorate level are often implemented in the form of bonus payments, partnerships, participation in the ownership of an enterprise with the help of shares / options. For ordinary workers, the approach is different. In this case, the development and implementation of a motivation system, the issuance of bonuses, in some cases - participation in profits, are expected. The SBU directively begins to act at the time of signing the relevant order. But its preparation, automation and other bureaucratic moments before use take a lot of time.
Real implementation
It is not enough only to find out the essence, purpose and objectives of budgeting. In reality, it will be possible to talk about implementation when this approach enters into living practice and will daily affect the organization’s activities. This is possible when changing the culture of work and management of the organization. In fact, elements of self-government are being introduced. It is for this that it is necessary to delegate authority and responsibility.
Let's look at the financial service example. She carried out directive planning and performed many functions. But as the enterprise grew and the volume of work, it was decided to switch to budget management. In this case, the financial service remains the functions of coordination, consolidation, training, analysis and control indicators. But the planning rests with the employees. At the same time, the principles of work of people in the company are changing. Horizontal responsibility will increase, the relationship between employees will improve due to the need for interaction and mutual coordination.
Actual implementation involves phased planning, starting with the owner. They set the task for top management. Then comes the turn of process responsibility centers (sales, production, advertising, and so on). At the same time, opportunities are created for the manifestation of initiative both on the part of managers and employees. It should be noted that the actual implementation is usually delayed for several months, and maybe even for a year.
What are the disadvantages in this case?
Alas, you cannot do without negativity. Interestingly, strengths are also a weak point. Thus, the delegation of responsibility is characteristic of the SBU. This requires the necessary competence and authority. And because of this, problems often arise. Indeed, when delegating authority with the help of an order, it is impossible to transfer or make a person competent. This property is not acquired or lost in this way. The subject either has competence or does not have it.
If you provide opportunities to a person who does not meet the obligations, then this will negatively affect the results of activities. The person to whom the duties were delegated had to be competent. This implies the presence of economic literacy, initiative, responsibility. If at least one of the listed components is missing, then it makes no sense to give the subject additional opportunities within the budget management system. Because of this, it is not uncommon for the SBU to be implemented not in full or with the highest possible efficiency.
Finally
So the concept, goals and objectives of budgeting is considered. And finally, you can touch on all kinds of manipulations that can be carried out with him. The first is the alteration of budgeting. It is often easier to do something from scratch than to change existing practices. This fully applies to the SBU. But these are the most extreme measures. More desirable is improved budgeting. This implies the changes that are necessary to increase the capabilities of the SBU. For improvement, it is characteristic to eliminate the shortcomings and errors that were made earlier when creating the organization. New functions may also be introduced, the need for which arises due to a certain change in the activity of the enterprise. Improvements also include software updates. In general, radically new aspects are being introduced. But the SBU itself is not being altered. And the last one is the modernization of budgeting. This is implemented to increase the capabilities of the system. In general, this seems like an improvement. Only when changes are introduced do not radically new aspects appear.