What is budgeting
What is budgeting
The term "budgeting" was included in the RussianThe economy is relatively recent, in English it means "planning." Budgeting is the process of drawing up and adopting a system of financial plans of an enterprise, which is based on the delegation of financial responsibility to the subjects of planning within the enterprise itself.
Types of budgets
When planning the activities of an enterprisea consolidated budget is prepared in which all the private budgets of the enterprise divisions are summed up. What is the budget for? It allows managers to compare actual costs and financial results with planned indicators and assess the effectiveness of the company.
All budgets compiled at the enterprise can be divided into two groups:
- operational budgets (implementation budget, labor cost budget, material costs budget, production budget, etc.);
- financial budgets (capital investment budget, cash flow budget, forecast balance sheet).
Business planningThe enterprise begins with an estimation of demand for production of this enterprise. At the first stage, two indicators are determined: the planned sales volume and the unit price. Based on these indicators, an implementation budget is drawn up and the estimated revenue of the enterprise is determined. When compiling this budgetary form, seasonal fluctuations in demand must be taken into account.
On the basis of data from the implementation budget, aproduction budget. This budgetary form reflects the planned production volume, taking into account the leftovers of finished products at the beginning of each period.
Particular attention is paid to budgeting costs,for this purpose the enterprise compiles: the budget of material inputs, budgets of administrative and commercial expenses, the budget of direct expenses for labor payment.
Based on individual operational budgetsThe plan of incomes and expenses in which all information on planned incomes and expenses of the enterprise is accumulated is made. In this budget form, a very important indicator will be reflected - the planned profit.
The budget of capital investments is necessary for the account of investment costs, this includes expenses for capital construction, acquisition and repair of the company's fixed assets.
The cash flow budget is one of thethe main budgets, on its basis, managers analyze the company's cash flows. The forecast balance allows us to analyze how the company will change its financial position in the future.
Organization of budgeting in the enterprise
As a rule, the overall budget is made up ofCalendar year. The budget period is broken down by months. For some budgets, a shorter planning interval can be set, for example, a decade or a week.
We can distinguish the following stages of the budget process in the company:
- drafting of the general budget;
- approval of the consolidated budget;
- budget execution;
- carrying out the analysis of budget execution of the current period.
The difference between budgeting and simple planningLies in the fact that financial responsibility for budget indicators is distributed among individual structural divisions. For these purposes, a financial structure is drawn up. It is a collection of financial responsibility centers. As a separate center of financial responsibility, the subdivision of a company that performs certain operations and is responsible for certain budget indicators may act.
To develop a competent financial structure is quite difficult, for this it is necessary to analyze in detail business processes.