what is budgeting
Types of budgets
When planning an enterprise, a consolidated budget is compiled, which summarizes all the private budgets of the company's departments. What is the budget for? It allows managers to compare actual costs and financial results with the planned indicators and evaluate the performance of the company.
All budgets drawn up at the enterprise can be divided into two groups:
- operational budgets (implementation budget, budget for labor costs, budget for material costs, production budget, and others);
- financial budgets (capital investment budget, cash flow budget, forecast balance).
Planning for a commercial enterprise begins with an assessment of the demand for the products of this enterprise. At the first stage, two indicators are determined: the planned sales volume and the price per unit of product. On the basis of these indicators, an implementation budget is drawn up and the estimated revenue of the enterprise is determined.In drawing up this budget form, it is necessary to take into account seasonal fluctuations in demand.
On the basis of data from the implementation budget, a production budget is compiled. In this budget form, the planned production volume is reflected, taking into account the balance of finished products at the beginning of each period.
Special attention is paid to budgeting costs, for this the enterprise draws up: a budget of material costs, budgets of managerial and commercial expenses, a budget of direct labor costs.
On the basis of individual operating budgets, a plan of income and expenses is compiled, in which all information on the planned revenues and expenses of the enterprise is accumulated. In this budget form will be reflected a very important indicator - the planned profit.
The capital investment budget is necessary to account for investment costs, this includes the cost of capital construction, the acquisition and repair of fixed assets of the company.
The cash flow budget is one of the main budgets; on its basis, managers analyze the company's cash flows. Forecast balance allows you to analyze how the financial condition of the company will change in the future.
Organization of budgeting at the enterprise
As a rule, the total budget is prepared for a calendar 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 a company:
- development of a draft general budget;
- approval of the consolidated budget;
- budget execution;
- conducting an analysis of the current period budget implementation.
The difference between budgeting and simple planning lies in the fact that financial responsibility for budget indicators is distributed among individual structural units. For these purposes, the financial structure is compiled. It is a set of financial responsibility centers. As a separate center of financial responsibility may be a division of the company that performs certain operations and is responsible for individual budget indicators.
It is rather difficult to develop a competent financial structure, for this it is necessary to analyze business processes in detail.
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