Budgeting of household expenses

In process of growth, any organization comes to need of budgeting of the activity. One of the major directions in this work – planning of expenses on business activities. First is an essential part of expenses which can be adjusted (it is possible to cut down, for example, the budget on purchase computationally of the equipment, however expenses on payment of taxes cannot be cut down). Secondly, these expenses can be controlled and limited accurately (the organization can refuse purchase of ADP equipment if they do not correspond to the budget, but it is impossible to refuse expenses on payment of taxes besides).

Andrey Pavlikov, chief of the department Budgeting of Diasoft company

In general, process of budgeting assumes the solution of three main objectives:

• Planning of the budget and installation of limits
• Control of the set limits
• Collection of information about budget implementation.

For the solution of these tasks there is a set of software packages. Some are focused on planning, others, on the contrary, – on budget implementation control. As budget implementation forms on the basis of accounting, such programs can be separated into two views:

• The budgeting system which is not integrated into the system of accounting (SA)
• The budgeting system integrated into the system of accounting (SA). Each of the specialized systems has the merits and demerits. To make a right choice, we will consider pluses and minuses of these systems.

We select a system

The budgeting system which is not integrated into the system of accounting

The systems of this type specialize in the solution of the budgeting task – they have well developed tools on planning and debugged reporting system. However, except planning of expenses, it is necessary to control limits and to monitor budget implementation. Such systems cope with this task "so far as" as the fact of execution is not provided in these systems. Some organizations solve this problem by compound integration from the SSU and significant expansion of the chart of accounts. What does it lead to? First, to significant loading of the SSU: a large number of postings and accounts reduces system effectiveness. Secondly, to increase in influence of "a human factor": in this case the accountant defines on what article and the CFD expenses in the budget belong. And, thirdly, to investment of accountant officers with functions of specialists of department of budgeting unusual for them (to define article and the CFD for each expense) that leads to significant expansion of an accounting staff and the overestimated requirements to qualification of employees. Therefore, it is impossible to call such option economically justified.

Pluses:

1. Good tools for planning solving of tasks – a system allows to plan "from top to down" and "from below-up", on the basis of these last periods, etc.

2. An opportunity to carry out the analysis like "that … if".

3. Big set of standard reports; built-in report generator.

Minuses:

1. Impossibility of full control of limits – a system cannot prohibit carrying out payment in the SSU.

2. Null information about budget implementation – a system cannot reflect in the budget accounting operation on reference of funds for an expense on the basis of own data.

3. The overestimated requirements to accountant officers and investment with their unusual functions.

4. Compound and expensive integration between a budgeting system and the SSU.

The budgeting system integrated with the system of accounting

The systems of this type usually work as a superstructure on the SSU and are not a main product of the company (the backwardness of tools for planning of the budget is explained by it). On the other hand, availability of all operational data allows to create automatically budget implementation, to be going and to control automatically the budget – for example, by the available agreements, partners, etc.

Pluses:

1. Accurate control of limits, up to prohibition of carrying out payment documents.

2. Automatic formation of budget implementation at reflection of expenses in accounting.

3. Possibility of detailed planning and automatic control of budget implementation.

4. Lack of costs for integration of systems.

Minuses:

1. Undeveloped tools for planning of the budget.

2. Insufficient number of standard reports.

Outputs

Contrastive analysis of pluses and minuses of different types of systems allows to draw the following conclusions:

• For the organizations which have no territorial and branched structure the choice of the budgeting system integrated with the SSU is economically justified
• For the multifilial organizations the specialized schedule system of the budget and reporting and the integrated system is preferable to operating control of limits and formation of data on budget implementation.

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