Budgeting

The planning horizon on the basis of budgets makes, as a rule, one year.

In general the budgeting system of the enterprise provides transparency of formation of financial results and a possibility of preventive actions in case of identification of unfortunate trends. As well as in a case with a rocket, the management system should warn beforehand about existence of deviations from the purpose and initiate development of the relevant decisions.

How the budgeting system is created?

The financial and economic model forms a basis for creation of a budgeting system. Structuring model is carried out not on the basis of detailing of processes, as in the previous example, and as a result of decomposition of financial performance of the company.

Starting point for creation of financial model is the profit of the company. In an analysis result of revenue breakdown and expenses the centers of responsibility providing formation of financial performance of which there is an end financial result are defined. Thus the centers of income, costs, profits, etc. are defined. The financial structure forming at the same time puts this or that financial performance in compliance to each element of an organization structure.

On the next step for the centers of the financial responsibility the structure of budgets which represent the code of the financial and economic indicators which are subject to planning and control is defined.

The final stage is development of regulations of planning, reporting, adjustment of budgets, the analysis of results of accomplishment of the adopted plans.

Thus, the full stroke of management providing orientation of the company to the selected financial and economic indicators is built.

A variety of models on the basis of which controlling indicators are under construction raises a question: "How these projections are connected among themselves?". Really, whether there are communications between financial and economic indicators, indicators of processes, indicators of corporate culture and other indicators of a system of controlling?

At the operational level these indicators have no direct connections. They exist in different measurements, are used by different management subsystems the company. Nevertheless, they are connected among themselves. This communication is provided by the strategic level of company management. The interrelation of all projections of a system of operational controlling and their balance, orientation on achievement of goals of the company is provided with the system of strategic controlling which is under construction on the basis of methodology of Balanced scorecards (Balanced scorecard).

Setting of a budgeting system at the enterprise

Budgeting - a widespread method of management accounting which cornerstone the principle of management on the basis of variance analysis is. As a rule, relative deviations of the actual indicators of business activities from the planned values set by the budget are used. The deviations exceeding permissible values are analyzed, their reason is established, in case of a negative variance measures are taken for their elimination. Admissible recognize deviations at the level of 4-5%. If deviations make more than 50%, then it is necessary to pay attention to budgeting accuracy. Specialists consider that with an insufficient accuracy of budgeting the method becomes inefficient. Other considerable factors affecting efficiency of this method are:

• existence of management accounting in the company;
• existence of the IT-system;
• conducting management accounting and budget making and also control of its execution in a single system. Budget making in the unified information system of the organization assumes unity of reference books, methods and report forms.

The budget of the company consists of 3 main budgets:

• balance estimation;
• budgeted profit and loss statement;
• forecast cash flow statement.

In terms of the sequence of preparation of documents for the main budget all planning process can be conditionally broken into two parts:

• Preparation of the operating budget;
• Preparation of the financial budget.

The operating budget is a budget of the separate CFD. The purpose of the operating budget - development of the budgeted profit and loss statement. The operating budget consists from: sales budget, purchasing budget, budget of cost value, expenditure budget. Development of the operating budget of trade organization begins with determination of the sales plan on the basis of which the sales budget is created. Further, taking into account the available stocks for the beginning of the planned period and the budget of stocks of goods at the end of the period, the purchasing budget of goods is developed. Budgets of cost value of goods, the cost budget on marketing and the budget of commercial costs depend on purchasing amounts. Besides budgets of labor costs, the budget of the total and administrative expenses are formed.

Budget making of sales is a starting point and the most responsible moment of process of budgeting. The sales volume and its commodity structure makes impact on the majority of other budgets which form on the basis of information on the sales budget. From that how exact will be the sales budget, the quality of all operating budget depends. Sales volume is subject to influence of such external factors as activity of competitors, the general provision in the national and world market, effectiveness of advertizing, cyclic and seasonal fluctuations.

The financial budget is a plan in which expected sources of financial resources and the direction of their future reference the period are reflected. The financial budget includes the budget of capital costs and the cash budget of the company. On the basis of the financial budget and the forecast of profits and losses the forecast of the balance sheet and cash flow are formed.

By drawing up the financial budget it is necessary to plan the amounts of taxes which are subject to payment in the budget, a depreciation amount of fixed assets, the amounts of debts to suppliers, funds of development of the enterprise and a financial incentive of employees, etc.

How to select a system for budgeting automation

The main requirement to the automation system of budgeting is a covering of all processes of a budget circuit, such as

• determination of structure of budgets (determination of a budgeting model);
• planning, statement and adjustment of budgets (for state structures — formation of a budget request, finishing limits of budgetary appropriations);
• accounting of the actual transactions different cuts (under the articles, the periods, the centers of the financial responsibility, such as centers of income, cost centers, profit centers, centers of investments);
• budget implementation control;
• formation of the summary and analytical reporting for different participants of budget process (the plan fact the analysis).

Specific evaluation criterion is the transparency of budget model allowing to trace communications between budgets and also existence of the developed means of the reporting, for example, of the configured detailed reports or a possibility of formation of any requests for receiving necessary indicators^[1].

In addition a system can provide support of planning processes, adjustments of work plans and programs of actions in coordination with budget indicators (budget items); planning and implementation of procurement procedures and contract activities; coordinate processes of budgeting to the main production processes of the organization (processes of business activities) via accounting mechanisms.

At the distributed hierarchical structure of the organization special attention should be paid to processes of collecting and consolidation of planned data of territorially remote divisions, bringing limits to the subordinated organizations (independent branches, the enterprises of holding), support of processes of approval of procurement documentation and agreements and also the consolidated statements. The automation system of budgeting can independently support these additional processes or due to integration with external systems.

If the selected system satisfies the organization for functionality, preference should be given that which has examples of successful implementations in our country. However it can be insufficiently — it is necessary to be convinced that selected by software it can be adapted for the system of budget management admitted to the organizations and it is corrected further at change of internal procedures, it is desirable without completions by customizers. It is necessary to remember that budget processes in the organizations with the state, commercial and mixed budget significantly differ as also budget models of the organizations depending on types of their activity differ. Therefore it will be useful to consider the specialized industry solutions supporting necessary structure of the budget.

It is impossible to underestimate and a factor of "the amount of business" — a system should not be too "heavy" for your organization. Accurately define the procedure which you need to support using a system: structure, detailing, frequency of the budget procedure, types of budgets, structure of the indicators necessary for decision support and organization of management. Estimate a possibility of formation of reliable indicators in a system – the sufficiency of the obtained data depends on structure of indicators, an accounting system and opportunities of timely accounting update.

When choosing a system it is necessary to consider the possibility of its use with already available automation equipment, for example, with the systems of accounting and operational accounting, management of contract activities and others. It is possible that control of execution of budget regulations will conveniently execute in an electronic document management system. Consider the possibility of replacement of the outdated systems by the built-in services of a new system.

Essential factors when choosing the automation system of budgeting is implementation cost and also that too is extremely important, the cost of further ownership of a system, including runtime royalty fees and technical support.

Also general criterions of the choice of any of an information system are also applicable: a solution architecture, technologies on which the product, performance and reliability, level of data protection and distribution of powers of users, convenience of the interface, a possibility of further development and adaptation of a system to change of operating conditions is implemented.

Despite transition of our organization to use of electronic documents, volumes of paper documents continue to grow. How to cope with the increasing volumes of documents?

Preserving of considerable volume of paper documents after implementation of EDMS is inevitable with assistance of the paper entering and outgoing document flows, incomplete transition to internal paperless document flow. It is worth remembering that failure from paper documents – not a main goal of implementation of EDMS. It is impossible to refuse completely execution of paper documents in interaction with the external organizations, in particular with government institutions. Besides, even in the presence of the implemented means of electronic approval employees are not always ready to read documents from the screen, preferring to deal with paper documents, or when in the company printing processes of the documents requiring paper signing or assurance by printing according to regulatory requirements remain.

The volume of paper document flows can be reduced, working in two directions – consistently completing transition to internal paperless document flow and transferring external communications mainly in electronic a type.

For government institutions the approved and highly effective methods of decrease in paper document flow are connection to MEDO and SIEI, the organization of electronic interaction with the subordinated organizations (connection of subordinated structures to information systems of central office or intersystem integration). Similar processes actively go in the field of interaction B-2-B (for support of such electronic interaction there are operators of electronic document management accredited by the state).

Among the main measures which take the organizations for significant decrease in volumes of paper documents it can is possible to specify the following:

• procedural exception of paper processing of documents;
• recognition of action of the documents signed with the simple or strengthened electronic signature;
• connection of all employees to a circuit of paperless document flow.

The last point concerns both final contractors, and the top management. Full electronic document management is impossible without implementation of mobile solutions for the heads of the top and average management supporting means of approval, editing documents and signing of documents EDS. Formation and granting on mobile devices of the reporting in electronic form also promotes reduction of a paper document flow.

Separately in the list of actions for decrease in volume of paper documents it is possible to select process automation of archive office-work, implementation of means of formation of electronic archive for document transfer in electronic form in Rosarkhiv or the organization of internal electronic archives.

Decrease in volume of papers can be promoted in general by the organization of the uniform working spaces for work with information providing direct access to it among which there can be also means of collaboration in different formation of plans and other structured documents.

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• Balanced scorecards (BSC)
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