When the stage of implementing the enterprise budgeting system comes, it is very important that the final document regulating the entire process is understandable to those directly involved.
It is obvious that budget users can be divided into two categories:
Financial services, whose employees are already at a high professional level due to the nature of their work.
Top management representatives who will have to make responsible decisions based on a consolidated plan regulating cash flows. For this, it is important to have a concise but informative base.
Therefore, the most rational approach is to self employed data package design two reporting forms intended for different purposes. It is very important that these budget presentation options contain all the necessary information, and that its presentation be concise, but at the same time provide information on any of the indicators of interest.
Example of budget form:
Parameter name Plan Fact Absolute deviation Relative deviation
Sales volume 347 349 2 1%
Income 7825 7818 -7 0%
Cost price -6104 -6273 -169 -3%
Profit 1721 1545 -176 -10%
relative indicator, % 22% 20% 0 -10%
Overhead costs -922 -950 -28 -3%
Selling expenses -469 -505 -36 -8%
Administrative expenses -453 -445 9 2%
Total: profit before tax 799 595 -204 -25%
% 10% 8% 0 -25%
The table shows that the cost price has increased significantly. A specialist working with indicators should be able to find out the reasons for this phenomenon.
Example of cost analysis:
Cost price -6104 -6273 -169 -3%
Product "A" -1488 -1830 -342 -23%
Product "B" -2900 -2498 -48 -2%
Product "C" -1716 -1495 221 13%
Profit 1721 1545 -176 -10%
Product "A" 372 420 48 13%
Product "B" 725 670 -55 -8%
Product "C" 624 455 -169 -27%
% 22% 20% 0 -10%
In the same way, you can decipher any of the parameters of interest.
The relationship between budgeting and the budget cycle of the enterprise
The budget cycle is understood as the reporting period for the implementation of the financial plan, consisting of income and expense items. In each company, based on the specifics of the organization of production, the most convenient and optimal period is established during which the funds make a full turnover. Then the process is repeated.
It is very important to follow the sequence of budgeting stages at the enterprise so that the movement of monetary resources is always under control. When the market situation changes, this allows you to quickly react and make the necessary adjustments in order to extract maximum profit.
The relationship between budgeting and the budget cycle of the enterprise
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Each iteration can be divided into three parts:
Planning. The current economic situation of the company is analyzed, the sequence of steps is written down and control points for possible changes are determined. The influence of external and internal factors is predicted and strengths and weaknesses are identified. The plan is designed to achieve pre-formulated goals that the company must achieve by a certain point.
Implementation. Step-by-step implementation of the provisions recorded in the document. This is a very important practical process, during the deployment of which it is necessary to constantly monitor the compliance of the actual values of key parameters with their planned values. For convenience, the global estimate is divided into a number of local budgets, the implementation of which is easier to control.
Completion. The results of the work done are summed up. An evaluation analysis of KPI is performed. If the deviations of actual values from planned ones are large, this indicates low efficiency of the structural divisions, or there are errors in the documentation.