Why motivate employees?
Any attempts to evaluate staff motivation are fraught with serious consequences for the management system. Everyone knows that with good quality work of employees and high productivity, research on motivation…

Continue reading →

HOW TO BUILD A FINANCIAL BRIDGE IN CIVILIZATION
Strange creatures are people ... They always want what is inaccessible. And when at last there is an opportunity to get what you want, interest instantly fades away and it…

Continue reading →

Credit Debt Masochism
Today, one of the main topics of all world media is the debt crisis that erupted in Europe. The absolute and relative values ​​of various types of debt (external, state,…

Continue reading →

Typical Budgeting Mistakes

For modern companies, the urgent task is the introduction and development of a budget management system. However, even in those firms where the budgeting process is sufficiently developed, employees often make mistakes. Therefore, bottlenecks are important to identify and correct in time.

Usually, the company faces the question: how to make the budget management system (SBU) as efficient as possible? To do this, it is necessary to find out what the budget management system is, what is its purpose and the conditions for successful functioning. A systematic approach to this issue will help to avoid many errors in the formulation and improvement of the SBU in the company.

Typical mistakes made at enterprises when budgeting can be divided into:
– conceptual;
– methodological;
– management.

Conceptual errors

We are talking about budgeting as a toolbox that is used in the management system. It is assumed that the company has developed all the functions inherent in this system: planning, organization, motivation, control and analysis.

Quite often, budgets are not associated with a business development strategy due to the lack of such a strategy for the company. This is fundamentally wrong. At the time of implementation of the budget management system, the company should have a well-developed mission and development strategy. Moreover, it is important to choose a strategy in the right direction.

For example, one of the companies involved in the sale of air tickets and using Internet technologies at the same time, believes that its mission is to promote Internet technologies. The budgets of this company contain significant costs for the development of a software product, the purchase of computers. In order to be successful and competitive, she, first of all, needs to orient her processes towards attracting customers. It is these costs that must contain its budgets. In this situation, it is obvious that the company has chosen the wrong strategy. Consequently, she is misallocating her budgets.

Budget management needs to be decentralized. Heads of departments should not be responsible for resources that they do not manage and for results that they do not affect. In other words, it is important to correctly identify the centers of financial responsibility for performance. To do this, managers at all levels should be involved in budgeting.

Methodological flaws

Management decisions are made by management on the basis of information about deviations from the budget. Deviations are calculated as budget data minus actual data. Actual can only be obtained from management accounting.

It should be noted that budgets in themselves do not represent managerial value. There are times when financial specialists of a company proudly say: “This year we have developed budgets, and next year we will set up management accounts.” This is obviously the wrong approach. It is important to know what the deviation from the budget is, and only then, based on the analysis of this information, make management decisions.

From the foregoing, we can conclude that the presence of a management accounting system is a necessary condition for the functioning of the budget management system.

A typical mistake is the use of actual accounting data. The information presented in the financial statements cannot be used for budget management for two main reasons. Firstly, it is not operational, and secondly, it lacks the necessary analytical representation, for example, in financial responsibility centers.

Thus, planning and control should be carried out only on the basis of management accounting data.

Management errors

For the budget management mechanism to function effectively, it must be managed. For this, the company develops regulations that contain the rules, sequence and control logic. Also, the regulations set the dynamics of the budgeting process, accumulate the experience of the company.

As a rule, the system of regulations in the company consists of:
– regulations for the development and implementation of the budget management system (at the stage of creation of the SBU);
– regulations for the development and adjustment of budgets;
– regulation of current management on the basis of developed budgets;
– regulations for improving the budget process.

A properly designed regulation should have a specific format. It includes the purpose, description and timing of the presentation of both input and output information, the stages of the implementation of the regulation, the listing of units involved in the management, responsible persons.

It should be noted that the regulations for the development and adjustment of budgets must necessarily contain a time frame when units receive their targets and resource constraints. After all, without this they cannot begin to develop their budgets.

It is also necessary to indicate the dates when the units present the planned budgets. Please note that such terms should be optimal and well thought out.

The main components of self-management
Self-education has as its goal the acquisition of knowledge and skills necessary to improve the quality of life. Self-education is an independent increase in knowledge, exaltation in mastery: the more…

...

Financial leasing management
Financial leasing satisfies the need for the most scarce type of borrowed capital - a long-term loan. Fixed assets transferred to financial leasing are included in the fixed assets of…

...

CONTROL PACKAGE: how to maintain control over the board of directors and why it is important
For you, as a founder, it is of utmost importance to maintain control of the company. Therefore, it is extremely important at an early stage to pay attention to corporate…

...

Free Business Game "Your Start" - Entrepreneurship Course
According to Edgar Dale's learning cone, the most effective learning is to simulate or perform a real action. It gives 90% of the result, compared, for example, with lectures, videos…

...