The term "budgeting" entered the Russian economy relatively recently, in translation from 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 planning entities within the enterprise itself.
Types of budgets
When planning the activities of the enterprise, a consolidated budget is drawn up, which summarizes all the private budgets of the departments of the enterprise. What is the budget for? It allows managers to compare actual costs and financial results with planned indicators and assess the company's performance.
All budgets drawn up at the enterprise can be divided into two groups:
- operating budgets (implementation budget, labor cost budget, material cost budget, production budget, and others);
- financial budgets (capital investment budget, cash flow budget, forecast balance).
Planning the activities of a commercial enterprise begins with assessing 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 the product. Based on these indicators, a sales budget is drawn up and the estimated revenue of the enterprise is determined. When drawing up this budget form, it is necessary to take into account seasonal fluctuations in demand.
On the basis of the data from the implementation budget, the production budget is drawn up. This budget form reflects the planned volume of production, taking into account the balance of finished products at the beginning of each period.
Particular attention is paid to budgeting costs, for this, the company compiles: a budget for material costs, budgets for administrative and commercial costs, a budget for direct costs of labor costs.
On the basis of individual operating budgets, a plan of income and expenses is drawn up, which accumulates all information about the planned income and expenses of the enterprise. This budget form will reflect a very important indicator - the planned profit.
The capital investment budget is necessary to account for investment costs, this includes the costs of capital construction, the acquisition and repair of fixed assets of the company.
The cash flow budget is one of the main budgets, on the basis of which managers analyze the company's cash flows. The forecast balance allows you to analyze how the financial condition of the company will change in the future.
Organization of enterprise budgeting
Typically, the overall budget is for a calendar year. The budget period is broken down by month. For some budgets, a shorter planning interval can be set, for example, a decade or a week.
The following stages of the budgetary process in the company can be distinguished:
- development of the draft general budget;
- approval of the consolidated budget;
- budget execution;
- analysis of budget execution of the current period.
The difference between budgeting and simple planning lies in the fact that financial responsibility for budget indicators is distributed among separate structural divisions. For these purposes, a financial structure is drawn up. It is a collection of centers of financial responsibility. A division of the company that performs certain operations and is responsible for certain indicators of the budget can act as a separate center of financial responsibility.
It is quite difficult to develop a competent financial structure, for this it is necessary to analyze in detail the business processes.