The essence of budgeting and features internal divisions
Financial planning provides proof of the company financial performance of its business units. This is because in a competitive environment, achieving revenue of the company as a whole is subject orientation of all its units to ensure that the ultimate goal. The mechanism of this orientation is the intra-corporate financial planning based on budgeting.
Features of financial planning structural units due to organizational and process structure of the company, their role and place in the process of manufacturing product and bring it to consumers. Production units performing complex technical operations related to the processing and manufacturing of products. Ancillary units provide services for maintenance and repair of equipment, construction and installation works, production tools and equipment. Serving units provide energy, transport, warehousing and more. There are administrative services that serve as the support, marketing, coordination and planning.
Typically, internal divisions have limited rights decisions related to finances. In this regard, a system of indicators for each level of government should be such as to ensure real perform certain tasks at the same time provide sufficient independent team of each department in identifying and using internal resources saving resources and improving financial interest in the outcome of work.
Budgeting as a type of financial planning combines the interests of units and the enterprise as a whole, and takes into account the characteristics of each of them through the costs and revenues specific to a particular unit. For example, at the workshop formed the bulk of the cost of production as possible a comprehensive account of reserves to reduce costs and their impact on the end result. A comparison of the actual costs of the regulatory budget lets you control the size variances. This requires that the relevant information is received at each level of management within the area of responsibility. This system requires the development of budgets with varying degrees of detail.
Intra-financial planning is based on a system of interconnected budgets, including:
- The budget of individual operations;
- Budgeting income and expenses structural units;
- Consolidated budget for the company.
The operating budget - a planning document that reflects the income and expenses for business transactions.
An example may be operating budgets Budget sales, budget reserves of raw materials, budget, labor costs, overheads budget more.
The budget is developed for structural units - shops, sections, divisions. This is called functional budget and reflects the costs and revenues of each unit. If the unit is involved in the formation income and indirectly reveal its contribution is rather difficult (administrative divisions), he defined budget expenditures.
The consolidated budget - a system of individual operating budgets and functional.
Implementing structural units budgeting activities aimed at ensuring the economy of material and financial resources, reduce non-production costs and increase control over the cost of production.
In developing the budget, special attention should be paid to the practical implementation of the principle of flexibility. There are several techniques designed to increase the flexibility of planning with which to consider deviations from targets, and in some cases even encouraged such deviation if it gives the opportunity to save money.
These methods include:
- The use of additional budgets;
- The development of several options;
- Method variable cost budgets.
Preparation of additional budget is to adjust and justify budgets set limits on expenditures, such as capital expenditure budget division of the company. If this budget is insufficient to implement the technical project, it is necessary to develop a corrective budget to ensure that the planned target.
The need to develop several options budgets caused by the instability of the environment or the uncertainty of domestic factors such as changes in demand for products, the completion of the reconstruction of production, development of new products.
The method of variable costs budgets widely used by foreign firms. It takes into account the effect of operating leverage in-house planning. The method is developed variable cost budget table showing managers the level of actual costs when changing the sales and production. These budgets allow you to make dynamic adjustments targets.
Thus, budgeting provides time and in space, organization performance targets in enterprise shops, stations, operations and thus realizes the integration, reality, completeness and efficiency.