Principles of building a budgeting system for railway transport

The concept of a system of budgetary management of various types of public activities appeared in the country's economy with its transition to market relations. Budgeting as an element of economic relations is a system for managing the production and financial aspects of the activities of an enterprise, organization or institution.

Main budget management tasks organizations are:

– planning of basic target production and financial operations:

– coordination of activities of industries with their production structures and individual enterprises;

– coordination of the interests of individual employees and the enterprise as a whole;

– control of the expenditure of material and financial resources;

– prompt assessment of deviations of actual results from the set planned objectives, analysis of the causes of these deviations and making decisions on the implementation of regulatory measures;

– stimulating the activities of financial managers and individual structures to improve the efficiency of the budgeting system.

Budget is a document in which indicators are formed that characterize various areas of both social and purely industrial activity. As a rule, the development of budgets is included in the financial planning system.

The construction of a transport budgeting system is based on the following principles:

1. The principle of budget-market motivation provides for the creation of a mechanism for motivational financing of branches of PJSC (until 2015 JSC) Russian Railways and their structural enterprises for the production and financial results achieved in the reporting period. This principle is implemented by the formation of a motivation fund.

2. The principle of budget consolidation implemented in two aspects. First of all, this principle means that the consolidated budget of both PJSC (until 2015 OJSC) Russian Railways as a whole and its branches is formed by combining (consolidating) all types of operating and financial budgets.

3. Distribution principle means that the consolidated actual resources of the financial budgets of PJSC (until 2015 OJSC) Russian Railways are distributed among their structural divisions within the industry-wide limits of these resources and based on the actual production results of the divisions.

4. The principle of interconnectedness is based on the relationship between budget indicators. Changes in the indicators of one budget are reflected in the results of those budgets that it affects. This is especially typical for the influence of the production budget on their other types: a change in production volumes naturally leads to a change in revenue from sales of products and affects the indicators of the sales budget, income and expenses, cash flow, and also leads to a change in production costs and an impact on the corresponding budgets – costs, production costs, inventories and purchases, etc.
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It is obvious that with a systematic approach to budget formation, a similar relationship can be traced between other types of industry budgets.

5.Controllability principle provides that all budget indicators, especially when assessing their actual implementation, are controlled through the accounting policy system of transport departments.

At the root of budget planning in railway transport are certain parameters, standards and prices, characteristic of a particular type of budget.

Options Budgets are a system of indicators that reflect the purpose of the budget and the types of activities for which it is developed. In accordance with the principle of interconnectedness, the parameters of one budget are the basis for the development of another or are an integral element of another budget.

Standards budgets establish limit values ​​of cost (or natural) indicators for meters by type of work for which their total value is developed.

Prices- ϶ᴛᴏ cost indicators regulating the formation of income and expenses of the divisions of PJSC (until 2015 OJSC) ʼʼRZDʼʼ. These are market prices for the acquisition of inventory items; sales prices of all types of transport products and settlement or transfer prices. The latter are used in mutual settlements of income between PJSC (until 2015 JSC) Russian Railways and its territorial and functional branches.

Principles of building a budgeting system for railway transport - concept and types. Classification and features of the category "Principles of building a budgeting system for railway transport" 2017, 2018.

The budgeting system is an organizational and economic complex represented by a number of special attributes introduced into the enterprise management system. The most important of them are:

– the use of special media for management information – budgets;

– assigning the status of business units to structural divisions (financial responsibility centers - FRC);

– high level of decentralization of enterprise management.

Traditionally, a budget was understood as a financial plan in the form of a balance sheet in which costs are reconciled with income. However, in the enterprise budgeting system, this category has acquired a broader semantic content. Often, a budget is understood as any document that reflects any aspect of activity in the process of fulfilling the mission of an enterprise. The budget sets the direction of activity. It also reflects the actual results of these activities. The main idea implemented by the budgeting system is the combination of centralized strategic management at the enterprise level and decentralization of operational management at the level of its divisions.

Decentralization of enterprise management when using a budgeting system means:

– delegation of managerial powers (and therefore responsibility) to lower-level units;

– increasing the economic independence of these units;

– providing units with certain property necessary to solve the tasks they face;

– assigning to units the costs associated with their activities; “fixing” means providing the ability to control these costs within a wide range;

– assigning part of the income they receive to departments;

– alienation of part of the income received by each division to finance the activities of divisions that do not have the opportunity to receive such income from the outside;

– the primacy of the enterprise’s mission over the goals of individual divisions. The degree of possibility of interference of higher levels in the activities of lower ones determines the level of centralization of management.

Basic elements of the budgeting system

The main elements of the budgeting system are income, costs, financial results (deficit or surplus), principles for constructing the budget system.

Budget revenues are funds received free of charge and irrevocably at the disposal of the corresponding Central Federal District - the center of profit or income. Secured income is income that goes entirely to the corresponding budget. Regulatory revenues are funds transferred from one budget to another:

– subsidy – funds transferred on a gratuitous and irrevocable basis to compensate for the deficit;

– subvention – funds transferred on a gratuitous and irrevocable basis for the implementation of certain targeted expenses;

– subsidy – funds transferred on the basis of shared financing of targeted expenses.

Budget expenses are funds allocated for financial support of the tasks and functions of the management entity.

Budget deficit is the excess of budget expenditures over its revenues.

Expenditure sequestration is a regular reduction of all expenditure items (except protected ones) when there is a threat of a budget deficit.

Budget surplus is the excess of budget revenues over its expenses.

Budget classification is a systematic economic grouping of budget income and expenses according to homogeneous characteristics. The enterprise budget system is based on the following principles:

– unity of the budget system;

– differentiation of income and expenses between levels of the budget system;

– independence of budgets;

– completeness of reflection of budget incomes and expenses;

– budget balance;

– no budget deficit;

– efficiency and economy of using budget funds;

– general (total) coverage of budget expenses;

– reliability of the budget.

When building a budgeting system, it should be remembered that financial planning is closely related and based on the marketing, production and other plans of the enterprise, and is subject to the mission and overall strategy of the enterprise: no financial forecasts will gain practical value until production and marketing decisions have been worked out.

Principles of building a budget system

The principle of unity of the budget system means the unity of the following elements: regulatory framework; budget documentation forms; sanctions and incentives; methodology for the formation and use of budget funds.

The principle of separating income and expenses between separate budgets means assigning the corresponding types of income (in whole or in part) and the authority to make expenses to the relevant management entities.

The principle of budget independence means:

– the right of individual management entities to independently carry out the budget process;

– the presence of own sources of income for the budgets of each management entity, determined in accordance with the methodology for forming the enterprise’s budget;

– the right of management entities to independently, in accordance with the current methodology, determine the directions for spending funds from the relevant budgets;

– inadmissibility of the withdrawal of income additionally received during the execution of the budget, amounts in excess of income over

budget moves and savings on budget expenditures.

The principle of completeness of reflection of income and expenses of budgets means that all income and expenses of the subject of management are subject to reflection in its budget.

The principle of budget balance means that the volume of budgeted expenditures must correspond to the total volume of budget revenues and receipts from sources of financing its deficit.

The principle of efficiency and economy in the use of budgetary funds means that when drawing up and executing budgets, the relevant management subjects must proceed from the need to achieve specified results using the least amount of funds or achieve the best result using the amount of funds determined by the budget.

The principle of total cost coverage means that the budget costs of all financial responsibility centers must be covered by the total income of the enterprise.

The principle of budget reliability means the reliability of forecast indicators for the socio-economic development of an enterprise, the realistic calculation of budget revenues and expenses.

Factors for increasing production efficiency when implementing a budgeting system

The purpose of implementing a budgeting system is to increase the efficiency of the enterprise. The criterion for efficiency is the excess of an enterprise's income over its costs when performing the functions assigned to the enterprise (its mission).

The efficiency of an enterprise during the transition to a budgeting system increases due to the following factors:

1. The entire set of financial flows associated with the formation of income and costs is brought into a single balance sheet. The problem of their coordination at the level of both the enterprise and its individual divisions is being solved. Complete clarity is created about how every ruble of the budget appears in the enterprise, how it moves and is used.

2. Assigning budgets to departments transfers a significant part of the responsibility for the level of workers' wages from the director of the enterprise to the heads of these departments.

3. The principle of material interest of all personnel in the results of the work of their department and the enterprise as a whole is implemented. The actual payroll of the department is calculated at the end of the budget period on a residual basis as the unused part of the cost limit established for it. The limit increases with income. It becomes profitable to increase income and reduce costs, since at the same time wages will increase.

4. The budget process implements all financial management functions at the enterprise, namely planning, organization, motivation, accounting, analysis and regulation. Moreover, financial management is carried out in real time.

5. It becomes possible to focus financial policy on solving specific problems. For example, an enterprise in a difficult financial situation can base its budget on the necessary funds and the repayment schedule for its overdue accounts payable.

6. The basis for financial planning is the plan for production of products, logistics and personnel support. The budgeting system becomes the basis for integrated management of all areas of the enterprise's activities.

Enterprise budget system

The budget structure of an enterprise represents the organizational principles of constructing a budget system, its structure, and the relationship of the budgets combined in it.

The budget system of an enterprise is a set of budgets based on production, economic relations and the structural structure of the enterprise, regulated by its internal regulatory documents. Consolidated budget is a collection of all budgets used in the enterprise’s budget system. The consolidated budget includes the budget of the enterprise as a whole and the budgets of individual management entities within it.

The enterprise budget system can be supplemented by the following aspects of the classification of budget documents:

– by functional purpose: property budget, income and cost budget, cash flow budget, operating budget;

– in relation to the level of integration of management information: budget of the primary accounting center, consolidated budget;

– depending on the time interval: strategic budget, operational budget;

– depending on the stage of the budget process: planned budget, actual (executed) budget.

Typically, at the enterprise level, the main budget documents are considered:

1. Balance sheet (property budget) – Form 1 of the enterprise’s financial statements.

2. Profit and loss statement (budget of income and expenses) – Form 2 of the enterprise’s financial statements.

3. Cash flow statement (cash flow budget) – Form 4 of the enterprise’s financial statements.

The budget for the production and economic (operational) activities of an enterprise is a document reflecting the production and sales of products, and other production results (it is not included in the official reporting and is developed in any form). The budget for the production and economic activities of the enterprise is transformed into a system of budgets for the operating activities of financial responsibility centers.

Implementation of a budgeting system

The system that implements enterprise budget management includes the following parts: economic, organizational, information, computer.

The economic part of the supporting system is represented by a certain economic mechanism operating within the enterprise. This mechanism assumes:

– assigning certain property to divisions of the enterprise, vesting rights to manage this property, income and costs;

– application of special methods for distributing income received and generating costs;

– use of economic incentive methods.

Budget development requires a significant amount of regulatory information - consumption rates, prices, tariffs, etc. To obtain it, significant preparatory analytical work is carried out, during which a thorough inventory of the enterprise’s income and expenses is carried out, reserves and losses are identified.

Organizational support includes modification of the organizational structure of enterprise management and changes in its document flow. Moreover, the implementation of the system usually does not require a radical restructuring of the organizational structure. In this area, the minimum requirements are as follows:

– each division is assigned the status: “income center”, “profit center”, “cost center”, etc.;

– a division is created that operates the budget management system (settlement and financial center, treasury, etc.);

– the head of this division is vested with the powers of deputy director of the enterprise.

The document flow diagram of the enterprise changes as follows:

– new documents are being introduced – mandatory income and cost plans;

– all types of actual expenses of the enterprise are checked against the budget before their execution.

The computer part of the software includes:

- personal computers;

– universal software environment;

– a specialized software package that implements the development and execution of budget documents.

Budgeting system options

In relation to the enterprise accounting system, autonomous and adapted versions of the budgeting system are possible.

The adapted version is based on the use of accounting information. The autonomous option involves creating your own accounting system, independent of accounting.

Each of these options has certain advantages and disadvantages.

The adapted version relies on well-established accounting information flows. It is free from duplication of accounting information and in this regard is more economical compared to stand-alone. It is especially attractive to use the adapted version with well-developed analytical accounting, when property, income and costs are taken into account by divisions of the enterprise. It should be noted that such accounting is sometimes identified with budgeting.

However, a significant problem here is budget planning. An important principle of the budget management system is the comparability of planning and accounting information. Therefore, in the adapted version, planning should be done in an “accounting” style. That is, if accounting is carried out in the context of accounting accounts, planning should also be carried out accordingly. In this case, a number of complex methodological problems arise, which to date have not had a satisfactory solution. And the stronger the analytical accounting, the more complex the planning.

The standalone option uses its own accounting system. This causes duplication of accounting information, resulting in increased management costs. However, the budgeting system is cheaper to develop and easier to operate.

The main functional blocks of the system are:

– planning block;

– accounting unit;

– analysis block;

- normative base.

When developing budgets, full compliance with plans for production activities, income and costs, cash flow and property of the enterprise must be ensured. The plans of the enterprise as a whole must correlate with the system of corresponding plans of individual divisions.

Consolidation of budgets

If the company is a holding company consisting of several separate enterprises (business units, branches, separate legal entities), then the question arises of creating consolidated budgets and reports for the entire company.

Consolidation of budgets can be carried out in two ways:

– joint planning and accounting of the activities of all enterprises in one system, which allows you to immediately generate consolidated budgets and company reports;

– maintaining separate accounting and generating own planning and reporting documents for each of the company’s enterprises and their subsequent integration into consolidated budgets and reports of the company.

Various areas of activity of the company's enterprises, an increase in the number of heterogeneous business transactions contribute to the maintenance of separate specialized accounting for each enterprise. This leads to the need to consolidate individual budgets and reports of the company's enterprises, which, in turn, requires the development of a methodology for this procedure.

If there are business transactions between different enterprises of the company, the consolidation procedure becomes more complicated, and it becomes necessary to exclude internal turnover when creating consolidated budgets and reports. One of the common types of internal turnover is intra-group sales. Profit from internal turnover may be included in balances on the balance sheet, for example, in products that a trading house purchased from company enterprises. Complex cases arise if internal turnover profits are part of the materials that are then used to produce the product.

In order to correctly exclude all the influence of internal turnover when consolidating budgets and reports, it is necessary to study the features of the company’s business organization and develop a consolidation methodology. The creation of such a tool will make it possible to quickly and efficiently prepare consolidated budgets and reports for provision to interested users and for making management decisions.

Effective organization of planning for enterprises involves the formation of an entire system of plans. The development of a plan system should include the following types of planning: strategic planning, business planning, budgeting. These three types of plans must be clearly linked to each other. The enterprise must use all three types of planning. They must be in strict subordination: based on the long-term strategic goals and mission of the enterprise, a business plan is developed, which is a tool for achieving these goals, and, further, in the budgeting process, a system of detailed plans is created with the organization of a system of coordination and control of their implementation, business plan oriented. Below in the article are presented theoretical methods and some practical features of the implementation of the third (final) component of the planning system - budgeting.

Basic principles of budgeting

• The budget is drawn up for a period of 1 calendar year with internal division by months.
• The budget is based on the planned values ​​of the Company’s key performance indicators, approved by the Board of Directors, and consists of the Main Budget and budgets for financial responsibility centers (FRC).
• The system of key indicators, the Main budget, and budgets for financial responsibility centers include both monetary and non-monetary values.

Stages of building a budgeting system

The implementation of a budgeting system and putting budget work on stream consists of the following main stages:

1. Determining the values ​​of key indicators
2. Drawing up the Main Budget
3. Financial structuring
4. Information structuring
5. Distribution of budget planning functions
6. Building a system of responsibility for compliance with budget regulations
7. Analysis of deviations from the budget, creation of a flexible budget

Below, each stage of implementing the budgeting system and putting budget work on stream is discussed in more detail.

System of key performance indicators of the enterprise

Determining key parameters is the primary step in the budgeting process. Established and approved by the Board of Directors.

The system of key indicators includes the following values:

• annual sales revenue (in thousands of US dollars);
• average markup level
• average level of costs (% of revenue);
• average level of net profit (% of revenue);
• average amount of capital involved;
• ratio of debt and equity capital;
• labor productivity of 1 employee (revenue from sales in US dollars/number of employees).

Preparation of the Master Budget

Based on the established values ​​of the Company’s key performance indicators, five documents are generated:

1. Budget of Income and Expenditures (BIB)
2. Cash Flow Budget (CFB)
3. Balance Sheet Budget (BBL)
4. Detailed expense budget
5. Labor and salary budget

In terms of the structure of indicators, BDR, BDDS, BBL are fully consistent with the main forms of accounting reporting: profit and loss statement, cash flow statement and balance sheet, and are their projection for the near future (planning year).

Taken together, all five budgets listed above constitute the Main Budget of the enterprise.

Financial structuring

At this stage, financial responsibility centers (FRC) are identified in the organizational structure of the enterprise.

There are 2 types of centers:

1. Affecting profitability;
2. Affecting solvency.

The first group includes income centers, cost centers and profit centers.

The second group is the centers of responsibility for receiving (receipt) and spending (outgoing) funds. This also includes investment centers.

Within one central federal district there can be centers of both types.

• Income centers - are responsible for the formation of the revenue side of the BDR
• Cost centers are responsible for the cost part of the BDR.
• Profit centers - responsible for the profitability of the enterprise
• Investment centers are responsible for cash flows for allocated projects.

At this stage, the structuring of budget items is carried out, the distribution of individual items into budgets for the Central Federal District and schemes for their consolidation into three main budget forms are developed (BDR, BDDS, BBL, Detailed expenditure budget, Labor and salary budget).

In addition to the indicators established in the budgets for the Central Federal District, for the implementation of which the heads of the Central Federal District are personally responsible, at the stage of information structuring, items are highlighted that are planned in some divisions, but fall into the budgets of other Central Federal Districts. This situation arises due to the following prerequisites:

• The budget item selected during information structuring falls into only one budget of the Central Federal District based on the functional features of this article and the functional purpose of the Central Federal District. For example, the cost item “Personnel compensation” falls only into the budget of the HR department.
• It is more convenient to plan budget items in the places where they arise, where the manager’s competence in determining the planned values ​​of certain budget items may be higher than that of the managers of the Central Federal District, whose budgets these items belong to. Thus, a budget item can be planned in various departments, but one head of the Central Federal District is always responsible for its implementation.

Distribution of budget planning functions

Data on the values ​​of budget items should follow a top-down pattern and be based on key planned indicators established by the Budget Committee in the business plan and approved by the Board of Directors.

In addition, at this stage, the heads of the Central Federal District provide the financial department with information on their forecasts of the values ​​of the indicators established for their center of responsibility. At the same time, the planning horizon for budget items by the heads of the Central Federal District should not exceed one month.

At this stage, the tasks of the financial department are as follows:

1. Monitor the process of collecting information from department heads;
2. Consolidate the collected information according to the scheme chosen at the stage of information structuring into the main budget documents - BDR, BDDS, BBL, Detailed expenditure budget, Labor and wages budget;
3. Divide expenses into fixed and variable;
4. Develop a system of standard indicators, establish and approve the values ​​of standard indicators;
5. Link the data received from the heads of the Central Federal District with the planned values ​​of key indicators adopted by the Budget Committee in the business plan;
6. Find a reasonable compromise between the forecasts made by the heads of departments and the planned values ​​of key indicators adopted by the Budget Committee.

The table below shows a list of budget planning functions, the timing of these functions (based on the premise that the planning year coincides with the calendar year) and the persons responsible for their implementation.

Building a system of responsibility for compliance with budget regulations

Heads of the Central Federal District are responsible for the implementation of budget indicators in accordance with the system reflected in the section Information structuring , each according to budget items identified for his or her center of responsibility. For the implementation of significant budget indicators, the head of the Central Federal District bears personal financial responsibility (through a system of bonuses and fines).

The budget indicator is considered fulfilled if it is 100% fulfilled or if it falls within a clearly defined deviation corridor (for example, the deviation should not be more than 5% of the planned indicator value).

The heads of the Central Federal District are responsible for the timely submission of information about the plans of the divisions to the financial department.

The finance department is responsible for:

• drawing up draft budgets based on the Company’s development strategy and our own vision of the current situation;
• development of standards;
• timely collection of information about department plans;
• drawing up the Main budget and budgets for the Central Federal District based on the collected information linked to the Company’s strategy;
• timely submission of the Main Budget, budgets for the Central Federal District and the system of planning standards to the Budget Committee;
• conducting an analysis of deviations in the actual implementation of plans and influencing unfavorable aspects that interfere with the implementation of budgets, ensuring control;
• building a flexible budget.

Analysis of deviations from the budget, creation of a flexible budget

Deviation analysis is carried out for all budget items, for each Financial Responsibility Center. Analysis for each individual item is necessary to identify the reasons for non-fulfillment of profit plans.

To build a flexible budget, you need a clear division of expenses into fixed and variable. Constants remain unchanged or are adjusted for inflation. Variables are calculated as a function of a certain indicator (sales or purchase volumes, man-hours used by certain categories of workers, size of warehouse space, etc.). Adjustments are made at the end of each month until the 3rd day of the next month. Fulfillment or non-fulfillment of a budget item is determined only by comparing actual expenses with adjusted plans, and not with originally planned expenses.

In addition to adjusting the planned indicators of expenses, the planned indicators of inventory balances in the warehouse, goods in transit, accounts receivable and payable are subject to adjustment. Recalculation of the planned values ​​of these balance sheet indicators is carried out based on their planned turnover. Decisions about the implementation or non-fulfillment of plans can only be made by comparing actual data with adjusted ones. Just like for expenses, all adjustments are made before the 3rd day of the month following the reporting month.

As a result of the analysis of deviations of the actual values ​​of budget indicators from the planned ones, monthly plans can be revised by a decision of the Budget Committee in order to fulfill the set annual plans (key indicators). In case of systematic failure to fulfill budgets (during the 1st quarter), by decision of the Budget Committee, annual plans may be changed, and the strategy may be revised.

All proposals for preliminary adjustments to the values ​​of budget indicators for the current month must be submitted by the heads of the Central Federal District to the financial department for consideration from the 20th to the end of the current month. Proposals are then submitted for consideration to the Budget Committee and approval by the Board of Directors. The adjustment can be considered valid only after completing all the above procedures.

amokryshev August 15, 2017 at 10:09 pm

Techniques for building corporate budgeting systems

• Systems Analysis and Design

If any statements seem controversial or insufficient to you, I will be glad to criticize and communicate in the comments.

What is budgeting

Conceptually, budgeting is the process of planning operations with assets of various types. In its simplest form, this means planning cash receipts and payments.

Typically, budgeting arises in an enterprise at the moment when several employees appear who have the right to enter into contracts and make financial decisions at their own discretion. This delegation allows you to close many more deals at the same time and takes the brakes off your revenue, but comes at the cost of losing intuitive control over efficiency and profitability. As a result, three new problems arise:

Firstly, several people, independently earning and spending money from a common pot, need a tool for coordinating actions: one earns money, another pays wages, a third buys materials, and a fourth attracts loans - coordination is needed.

Secondly, the current account balance can no longer serve as a tool for monitoring business - with a large number of unrelated, parallel transactions, it is uninformative.
For example, the amount in the current account will grow, even if the company is operating at a loss, as long as the growth in sales volume covers current expenses.
Conversely, an untimely large purchase can destroy a highly profitable business if it causes the company to be unable to meet other obligations and to file for bankruptcy.

Thirdly, the opportunity to pay with company money and accept obligations for it is an irresistible temptation for employees. In the absence of control, abuse is inevitable.

Thus, the main task of the budgeting process is to solve these three problems.

The solution method is as follows:

The first step is to build a mathematical model that will calculate, balance and coordinate future income and expenses, providing each of the delegates with guidance on how much, on what and when he can spend, and how much he must earn to meet these expenses.

The second step is to build a process for agreeing contracts and approving invoices to comply with established rules.

The third step is to take into account actual financial transactions and adjust plans and limits so that income and expenses continue to match each other.

Why use OLAP for budgeting

For example: Oracle Hyperion has six required dimensions, two multi-currency and twelve user-defined. Most budget models include from 9 to 14 dimensions, but in some cases there may be 20. This number of dimensions is necessary to always store interrelated numbers in adjacent cells, regardless of the complexity of their structure, thereby reducing most operations with them to arithmetic, and reduce the speed of reporting generation to seconds.

BI systems also provide many important services: the ability to write SQL-like queries, create and fill out beautiful reports with the mouse, centrally store all data, manage viewing and editing rights, program integration with other databases, etc.

The benefits of OLAP are even more clearly demonstrated by solving a typical corporate governance problem:

Problem: At the end of the next quarter, reports showed that costs were growing faster than revenues. Task: Identify specific operations that most influenced the problem, the managers responsible for this, and jointly plan measures to normalize the situation.

Solution: Open from the OLAP cube to the cost and income report. Next, one by one, open the sections with the mouse: by product, by time period, sales channel, region, division, customer category, type of cost, etc. to the level of specific accounting entries. Localize exact deviations in the costs and volumes of operations, organize them by volume. Obtain specific facts and measurable indicators for further work with responsible managers, in order of their contribution to the total deviation.

Now imagine how many spreadsheets you need to create and view to do the same in a company with a couple of dozen divisions or more?

General principles for constructing budgeting systems

In the case of budgeting, the final goals are:

1. Ensure the expediency and coordination of the company’s income, expenses, receipts and payments in conditions where financial transactions are carried out simultaneously by many employees.
2. Organize control over payments and cash receipts so that at any time you know the limits on types of costs that the company can afford, taking into account actual income and expenses that occurred in the past, as well as taking into account the need to maintain a sufficient reserve of cash to cover future costs and risks.

You should pay attention to the word “Feasibility”. This phrase may be unclear to some readers, others will think that it means that all income and expenses should be subordinated to the goal of making a profit, and they will also be wrong.

Profit is a popular goal for managers, but it cannot be called the most reasonable, so most professional managers want not just profit, but an increase in the company’s financial flow. Financial flow consists of the growth rate of turnover (income), profit margin and asset value. It is necessary to design the system so that it allows you to find the right balance between the size of profit, the rate of growth of business turnover and the size of assets in such a way as to obtain maximum benefit both today and in the future.

Technically, the budgeting system is simple - it is an array of amounts of financial transactions, broken down by several analytics, one of which is always the calendar period. On the other hand, it is quite complex - it consists of a couple of dozen hierarchical directories, hundreds or thousands of forms and reports, and dozens of scripts.

If you are an experienced financial manager and know exactly what you want, then you can easily build one for yourself. However, if this is your first implementation, then there is a high probability of difficulties, especially if you are a financier and understand in management accounting methodology.

A complete, methodologically correct budget model that takes into account the structure of a business is objectively complex. But few people can clearly formulate so many tasks and requirements and set priorities on the first try. As a result, you will most likely end up with a system that implements all the requirements of the methodology, but is of little use for solving basic problems.

To avoid this, it is necessary to complicate the system gradually, implementing functions in the order of cause-and-effect relationships between the problems they solve.

In my opinion, the priorities between functions should be as follows:

1. Ensure basic coordination - draw up a plan for the types of receipts and payments, by period.
2. Establish personal responsibility and limits - delegate planning to departments, maintain a master plan and organize the approval of contracts and accounts.
3. Introduce factual accounting and basic performance assessment procedures.
4. Ensure the possibility of objective control - move from planning amounts to price and physical indicators.
5. Implement costing and pricing calculations - one by one, introduce procedures and reports in accordance with the management accounting methods you require.
6. Introduce planning in the context of legal entities and implement master budgets, starting with BDDS and BDR.
7. Complicate: Introduce additional sections and advanced accounting and business analytics methods.

Building budget planning functions

The first task that a company solves when planning a budget is the coordination and coordination of financial transactions between all authorized employees. In order to do this, at a minimum, you need to have a table with the amounts of cash receipts and expenses broken down by types (elements) and calendar periods.

Thus, we receive the first and most important reference books: “Types of income and expenses” and “Periods”. Different organizations have different volumes of activity, financial habits, and terminology, so “Receipts and Costs” are often replaced by “Accounts” or “Items.”

Picture 1 - Examples of simple budgets

The next step is to set personal limits, which is why the third most important reference book is the “Financial Responsibility Centers” (FRC).

Having three dimensions with reference books “Articles”, “Periods”, “CFD”, you can already delegate the rights to carry out financial transactions to employees and coordinate their actions. But at the same time, you can control the validity of the entered amounts only informally, by communicating with everyone, and this is a very labor-intensive and time-consuming procedure that must be repeated regularly. The second unpleasant consequence is that you cannot quickly make financially sound decisions, for example: at what price to purchase materials, whether to pay a new employee the desired salary, etc.

To change this, you need to budget not amounts, but indicators: the amount of materials purchased, average purchase prices, employee hourly rates, labor costs, natural production and sales volumes, etc. In this case, you can double-check the data using objective sources without communicating with employees. In addition, you can conveniently delegate this task to assistants. Planning prices and natural volumes also allows you to quickly determine the impact of deviations of one indicator on another and on the amount, and this will significantly strengthen your arguments in negotiations with partners.

Thus, we come to four directories: “Articles”, “Period”, “CFD” and “Indicators”, while the number of elements in the “Indicators” directory depends on the number of units of measurement, coefficients and formulas used. In the simplest case: “Price”, “Quantity” and “Amount”.

Picture 2 - Budgeting based on natural indicators in the context of the Central Federal District

The control efficiency has now become much better, but you still cannot calculate the cost of production and determine the minimum and optimal prices. The easiest way to determine your cost is to simply divide all your expenses by the number of products produced. However, this will only work if you produce one product, otherwise questions immediately arise about the fairness of distribution. Therefore, financiers use more complex approaches, such as Marginal Costing, Absorption Costing, Activity Based Costing, etc.

The simplest of them is Marginal Costing. With this approach, all types of costs are divided into two groups: direct and indirect. Next, for each product, standards are calculated by type of cost, and the calculations are programmed so that when you enter the production volume, the volume of direct costs is automatically calculated. Obviously, in this case, the minimum possible selling price of the product will be its marginal cost.

Using the Marginal Costing method, we come to five directories: “Articles”, “Period”, “CFD” and “Indicators”, “Products”, and in the directory “Indicators” we also add “cost standards”.

Picture 3 - Budget after implementing Marginal Costing

Then the following problem arises: in most organizations it turns out that there will be more indirect costs than direct ones. If you produce more than one type of product and are not ready to intuitively divide indirect costs, you will need to apply Absorption Costing and understand the fair cost of production, taking into account all costs. With this approach, it is necessary to divide all costs into two categories: those related to the production of a specific type of product and those necessary for the operation of the Central Federal District as a whole.

The first category of costs is allocated to specific products and divided by production volume to obtain unit costs, but such simple costs are rare. The second category is more difficult to distribute: not every central federal district produces products; in addition, they constantly provide services to each other, so their expenses are mixed.

To solve this problem, you will need to first distribute all costs to specific central financial districts, and then divide all central financial districts into Product and Service, based on whether they directly produce products. The costs of all Service CFDs must be distributed to Product CFDs, in one or more iterations. The total costs of Product CFDs are distributed among the types of products they produce.

At the same time, indicators like “Distribution Bases” appear in the system, allowing you to fairly allocate costs from Service CFDs to Product CFDs and further by type of product.
Examples of such databases: “Number of hours for equipment repairs”, “Area of ​​cleaned workshops”, “Labor hours for the production of a type of product”, etc.

As a result, we can divide the allocated costs by the production volume and get the cost, and we can also study the mathematical dependence of the cost on the production volume.

Thus, in our model, the “Indicators” reference book becomes even more complicated and the first serious calculation scripts appear.

Picture 4 - Budget after implementing Absorption Costing

Now we can determine prices, discounts and other parameters important for doing business. We can continue to complicate the model by introducing additional management accounting methods if the situation requires it.

In this way, we will get closer to professional financial models that will allow us to control not only costs and revenues, but income and expenses, current and non-current assets, capital and debt, and many more important figures.

The complexity of the model and the number of directories increase even more if the company uses several legal entities, operates in several regions, uses several sales channels, factories, types of workflow, etc.

Picture 5 - Professional budgeting model

However, all this will be absolutely useless if we do not compare our plan with the actual results of the work, so we must move on to the next section.

Construction of performance evaluation functions

The very first method that is usually implemented is the Plan-Act comparison. To do this, a reference book “Scenarios” is introduced into the budget model, with the elements “Plan” and “Fact”. Now we can enter actual data into the system and calculate the amount of deviations, and then redo the rest of the plan. However, if we change the numbers on the “Plan” element, we will erase what was originally entered and lose valuable information. In order to avoid this, another element “Fact-Forecast” is introduced in the “Scenarios” directory, into which the data of the “Fact” element from the past and the data of the “Plan” element for the remainder of the period are uploaded.

After this, we can adjust the numbers on the “Fact-Forecast” element and use them as a new plan, while maintaining the ability to compare with the original numbers and evaluate the accuracy of planning. Typically, companies review plans once a quarter or once a month; for this purpose, they create three or eleven elements of the “fact-forecast” type in the “Scenarios” directory.

The next task that is usually implemented is to compare operating results with the same period last year. This allows us to understand how much better or worse we have become. On the one hand, we can each time add a new year with quarters, months, days and weeks to the “Period” dimension, but it is much more convenient to build tables using reference books located in different dimensions of the OLAP cube. So the best solution would be to create a separate dimension in the OLAP cube and place the “Fiscal Year” reference book there. This way, we can easily make a report that will contain periods in columns and financial years in rows, and the difference in the results of similar periods will be very clear.

Additionally, we can introduce the “Version” dimension in order to store different budget options: working, agreed and approved versions, etc.

Picture 6 - A complete budgeting system

By making these changes, we can implement more advanced features and approaches, improving our management and depth of understanding of the company's situation through the use of a wide range of methods developed by accountants over 400 years of development of their science.

Conclusion

In order to obtain these benefits, it is necessary to correctly formulate goals and prioritize requirements, if necessary, sacrificing the complexity of the methodology in favor of implementing basic functions and maintaining a reasonable balance between mathematics, labor-intensive information entry and visualization of reports.

I hope this article will help with this.

Before substantively considering practical tips and recommendations that will illustrate how budgeting is carried out in an enterprise, and at the same time understanding more deeply why a modern and dynamically developing market participant needs a budgeting system, it is worth paying attention to the fundamental importance of this step in the self-determination of the company. After all, building a budgeting system is an extremely important stage in the development of the organization and in many ways capable of influencing the future of the company.

At the same time, you should not assume that the implementation of a budgeting system in an enterprise will only require appropriate configuration of an automated information system and the presence of a programmer capable of finalizing new reports. Of course, much in this difficult process depends on the information development of the enterprise, but not everything. The professionalism and involvement of financial management plays a decisive role in establishing a budgeting system and improving the existing budgeting system at an enterprise.

The transition to a full-fledged budgeting system in a company and a budget management system is impossible without a major structural change in the entire organization, since the establishment of an effective budgeting system requires serious, verified, coordinated and focused work from management and employees.

Setting up budgeting in an enterprise and the role of the budgeting system in an enterprise

The stages of setting up a budgeting system may go beyond each other, but in general, when using a sequential approach, they do not change their order much. Let's consider the main stages of setting up a budgeting system at an enterprise.

Development and implementation of the correct organizational structure of the company in order to establish a budgeting system in the enterprise

The simplest, but at the same time the most expensive way to build a new organizational structure is to involve a third-party specialist, or rather, a special team that can immediately identify bottlenecks by looking at the situation “from the outside.” But this problem can be solved most effectively and cheaply by a working group formed from highly qualified internal specialists who are personally interested in the transition to effective budgeting.

In general, the effect of a correct budgeting system will be quickly felt at all levels of the organization, so an extremely important stage of work is informing staff about the benefits that they will receive from the implementation of the new system. Naturally, ordinary employees are concerned not so much with the global efficiency of the company as with their personal efficiency, on which bonuses and profits are tied. That is why, in order for an employee to understand that the overall efficiency system will have a positive impact on his work in particular, it is necessary to explain in detail to the staff what benefits a particular employee will receive from setting up a budgeting system.

As a rule, organizations develop a less than optimal organizational structure, which is largely a consequence of historical disorganization. Key processes may be more or less set up, but smaller ones, for example, functional connections, clarity of hierarchy, regulations for interaction and subordination between departments, go by themselves. Why?

On the side of logic here is the fact that any work with the budgeting system does not bring companies money “here and now,” therefore, at the level of insufficiently qualified management, the unspoken rule “not to pay attention” is often adopted. This question depends on the horizon of strategic planning and the scale of development that the company wants to achieve.

If a company has, for example, ten to fifteen employees, and the actions of each of them can be controlled at the level of simple communication, an imperfect organizational structure will not cause much harm to activities. But as soon as development reaches a certain milestone, for example, a distributed branch network and a multi-level hierarchy appear with a large number of processes and interconnections of personnel work; if the organizational structure is not logical, not clearly regulated and, most importantly, does not work as a single mechanism, chaos arises in the enterprise .

An outside management specialist, as a rule, immediately sees problem areas and can, at a minimum, indicate to management with a “blurry eye” what should be paid attention to first. It often happens that internal users of the organizational structure do not see trivial errors, because, in general, the processes work, but no one thinks about their optimization, especially if we are talking about a company in which no one is motivated to achieve results. And, surprisingly, there are an overwhelming majority of such companies on the market today.

Optimizing the organizational structure is the first and most important step for establishing a budgeting system in a company, as well as for subsequent improvement of the budgeting system in a continuous cycle. Regardless of the method of assessing the current organizational structure and then implementing a new one, either through external consultants or through the creation of an internal working group, the goals will be the same.

Their essence can be formulated as follows:

• Analysis of the current situation;
• Development of effective improvements;
• Implementation in practice;
• Control of implemented innovations.

At the same time, excesses should be avoided in terms of developing an organizational structure, therefore, when creating it, you should adhere to the basic principles of effective management:

• Ease of execution of organizational structure levels;
• Clear structure for staff;
• Order in relationships and functional subordination.

Figure 1. Company organizational structure.

It is necessary to adhere to these principles in order to ensure, as far as possible, the greatest transparency of the structure for the future harmonious development of the enterprise. Let us remember that the simpler the organizational structure, the easier it will be to develop a budget management system.

As an example, we give a block diagram of an organizational structure that is optimal for the process of further development.

Figure 2. Flowchart of the company's organizational structure.

Creation of a financial structure to improve the implemented budgeting system at the enterprise

To achieve productive budgeting, it is necessary to introduce a model in the company that will distribute the responsibility for executing budgets, the efficiency of spending resources, and will make it possible to control and analyze the ways in which expenses and income arise in the enterprise. To do this, based on the approved organizational structure, a financial structure is formed, in which the company is represented in the format of interconnected centers of financial responsibility.

Financial responsibility centers are assigned classification types depending on the business task of the business unit in question. Each business unit belongs to one of the types of financial institutions in the financial structure:

• Investment centers (CI - investment centers)
• Income centers (IC – income centers)
• Margin centers (MCD – marginal income centers)
• Profit centers (CP - profit centers)
• Cost centers (CZ - cost centers)

Each central financial district leads a “double life”, acting as a business unit and as a center of financial responsibility in the format of its budget at the same time. With this state of affairs, the balance necessary for any effective organization is achieved: the department begins to be responsible for performing its tasks within the framework of business functions, within the limits set by the budget.

Each central financial district within the financial structure of the enterprise has a person responsible for the results of its work. Usually this is a local department head, for example, the head of the sales department, warehouse manager, purchasing director, etc. Sometimes the employee responsible for the results of the Central Federal District may not be related to the implementation of directly local work functions, for example, the chief architect.

Development of an enterprise budget system

Depending on the financial structure of the company, management and the working group for implementing the budget management system make mutually agreed upon decisions about what types of budgets a particular enterprise needs. The budget system establishes budget relationships, levels of budget formation, as well as the internal structure of budgets according to directories of budget items. A decision is made to localize the budget system in the Central Federal District and consolidate local budgets into a single enterprise budget (consolidated budget). Each approach has its pros and cons, and a specific method is chosen based on the logic of the situation and applicability at a particular enterprise.

Each Central Federal District manages its budget based on planned and actual data of its activities, and the financial service, based on them, generates consolidated forecast budgets:

• Cash flow budget for liquidity management;
• Budget of income and expenses to support and manage the profitability of the company at the planned level;
• Management balance sheet for managing business value.

The data from these budgets collectively enable management to assess the operating status of the enterprise, present target values, forecast short-term and long-term trends, and, if necessary, plan actions that can help achieve goals. If the planning and forecast analysis showed that the goals are achievable and the company’s efficiency corresponds to the planned level, local level budgets are approved and begin to be executed. If the data and plans do not fully correspond, budgets are adjusted and a search is made for the optimal scheme for the company's activities.

After the forecast budget is formed and approved, we can say that it performs the function of a central management document, which is mandatory for execution by all central financial districts and the company as a whole. Speaking about this in the broad sense of the word, you need to understand that any budget is not the ultimate truth, but rather a planned, forecast and at the same time non-linearly changing value that shows us in dynamics what is happening to the business at all levels. An in-depth analysis of the budget forecast and fact helps to make important decisions in advance that can significantly increase business efficiency and anticipate the development of some global financial and managerial problems.

Development and implementation of accounting policies, analysis systems, preparation and implementation of regulatory documentation

The accounting policy in the company is intended to determine the rules for the implementation and integration of accounting with management and production accounting, depending on the internal policy of the organization in this matter. It is rational to implement accounting policies consistently, avoiding discrepancies at the department level and achieving consolidation in all matters of budgetary activity.

Regulatory documents are used to record clear requirements and rules that provide unambiguous interpretation, helping to avoid controversial issues. The composition of the documentation in different companies may vary greatly, but in the working version it should contain provisions on all subjects of the budget process, regulations for conducting sub-processes and job functions of personnel:

• Regulations on the work of financial responsibility centers;
• Accounting Policy Regulations;
• Regulations on budgets of all levels;
• Regulations on the work of the financial service;
• Guidelines for budget recipients;
• Regulations for performance assessment;
• Financial analysis regulations.

Documentation is developed once, but work with it continues continuously. Rational changes and additions that help optimize established procedures should become the norm in the organization.

At the same time, it is very important to avoid changing the composition of regulatory documentation when changing staffing. The “new broom” principle does not apply to the enterprise budgeting system under any circumstances. Any new employees, from ordinary employees to managers of the Central Federal District, are integrated into the approved budget system (naturally, with the ability for them to introduce rational improvements for consideration).

The main routes for setting up a budgeting system

The budgeting process at an enterprise can actually be presented in the form of three possible routes (methods):

• Top – Bottom (Top – Down)
• Bottom – Top (Bottom – Up)
• Circular route (Top - down + Bottom - up)

The top-down budgeting route assumes that the prerogative of choosing budget policy is given to senior management.

This method cannot be called the most successful, if only because with such an organization of the budget system, proposals from lower echelons are completely ignored or minimally taken into account. On the one hand, such a budgeting route should fully correlate budgets with the strategy and global goals of the organization, but this does not happen due to the lack of communication between the higher and lower departments of the organization.

At the same time, the obvious disadvantage of this approach is the complete absence or extremely low motivation of lower-level managers in achieving any goals due to the complete lack of personal interest.

It is typical for enterprises with a multi-level or distributed structure that need to combine lower budgets into a first-level budget. Let’s say that an insurance company with a branch network, under this model, will collect budgets drawn up by each additional office into the budget of a group of offices (in the district), then into the budget of the city, region, and then, by analogy, to the center. In such a system, the function and responsibility of middle management increases, which must ensure the identity of the articles and the consistency of the indicators.

One of the serious disadvantages of this budgeting route is the frequent inconsistency of local indicators, the increase in the duration of the budget process, as well as the possibility of manipulating indicators at the local level in order to ultimately obtain a profit from the implementation of biased indicators.

With the circular method, which can be called the budget process route, the greatest balance of local indicators and tasks from the center is achieved.

The center first instructs the lower levels on goals and objectives, usually using historical and analytical information in its requirements, after which local units formulate their budgets, comparing them with the ability to fulfill the tasks of senior management. At the final stage, budgets are adjusted, and all links in the budget chain receive an agreed set of indicators and values. Internal consistency is the greatest advantage of this budgeting method.

Figure 3. Budget process route.

Single budget or Basic budget

The unified budget is the main document of the budgeting system. Its main task is to enable managers at different levels to make rational management decisions.

A single or, as it is also called, a master or general budget contains all consolidated information in a block format, covering the entire enterprise and demonstrating all internal relationships.

The big budget, as it is commonly called in the business world, is the final summary of the work of the entire budget process, working groups, meetings, plans and decisions that are aimed at ensuring the achievement of the company's goals and its well-being. It also helps resolve all operational issues, from the possibility of redistributing resources and recalculating reserves, to making decisions on finding unplanned credit resources.

Over time, the function of the main budget also changes: if at the beginning of the period it represents a plan of expenses and income, then at the end it serves as a control and accounting tool that allows you to evaluate the results achieved and draw important management conclusions.

The main characteristics of the unified (main) budget of the enterprise

• Specific budget period, meaning a clear time frame for planning, execution and monitoring of the results of the budget system.
• Forecast component– information about trends and forecasts that the company’s management focuses on.
• Update frequency– the budget is constantly changing in accordance with the situation, information updates made by departments, as well as regulations. For example, upon expiration of a control point of a period - a week, a month or a quarter.
• Variability of situation development– a parameter included in a single budget as a range, the value of which may differ depending on the market situation (raw material prices, exchange rates, etc.)
• Reality of information– the budget contains real expense items, and not numbers that are pleasing to the management’s eye. Its task is to reflect real consolidated information on the company.
• Analytics of external factors– taking into account external information that may have a significant impact on internal processes or the business as a whole.
• Consistency between levels of the organization– clarity and unambiguous interpretation of meanings and tasks by all participants in the process, equal involvement and motivation.
• Competency to make decisions. A budget is not a normative document; its composition and form may differ greatly from financial reporting forms. Therefore, the freedom of the budget form should be its advantage, which ensures that information is systematically included in the budgeting plan, and only that which is needed for making management decisions.

Figure 4. Characteristics of a single budget.

Example of entering budgets in WA: Financier

Our article “Budgeting System in an Enterprise” provides a description of the general principles of the budgeting process in an enterprise. In this case, we will look at the capabilities of “WA: Financier” for generating budget reports. To do this, as an example, we implement a simple budget scheme:

Budgets in “WA: Financier” are entered using the corresponding “Budget” document:

The following options are available to speed up and simplify the entry of plan data:

• Filling out payment schedules in contracts;
• Filling in one Budget data for several periods, items and their analytics;

• Setting dependent revolutions.

Based on the results of the settings given above, the following dependent planned revolutions were automatically generated:

Completed budgets are subject to approval. “WA: Financier” implements the ability to configure various “Approval Routes” in user mode without programming. Depending on different conditions, different route options are configured.

For each approver, which is determined automatically depending on whether the approved budget meets the conditions shown above, when setting up a route, the parameters for its approval are indicated:

After which, when starting the approval route for a specific budget, information about the current approval status becomes available to all users:

Thus, according to the entered planned data - several budgets for different central financial districts of one company, it is possible to generate a final consolidated budget using different system mechanisms:

• The “Budget Execution (Consolidated Report)” report allows you to configure the output of data on the required selections for several central financial districts, organizations, periods, etc.;
• The “Custom reports” mechanism allows you to configure, for example, “Consolidated BDR”.

Conclusion

The introduction of a budgeting system, as can be seen from the components of this issue discussed in the article, is just the beginning of the work. We can say that this is the first stone in the foundation of the formation of a productive financial and business management system for an organization from the point of view of resources. Next, it will be necessary to continuously improve the budgeting system and its modernization over time, because it is working with budgeting in dynamics that is the main guarantee, or, better said, a prerequisite for the success of a company striving for effective management.

It is obvious that building a budgeting system is an extremely complex multifaceted process that has sufficient variability depending on the internal specifics of the company, the composition of its management and executive level, as well as the characteristics of its business units.

In large companies, it makes sense to implement more complex budgeting systems due to the need for more careful budget planning, which applies to all levels of the giant company.

Mid-segment companies can begin budgeting practices with small functional systems that are aimed at internal efficiency and optimization of production processes in the company. Thus, setting up a budgeting system can be relevant in any enterprise, regardless of the field of business or the size of the company.

Budgeting in the business world is a key management tool. If you compare budgeting with a material item, then you should choose a Swiss knife, which, in addition to the knife itself, has all sorts of accessories for all occasions. The same applies to budgeting: it allows not only to plan work and control the company’s business, but also creates opportunities for timely analysis, modeling, forecasting and increasing efficiency. Ultimately, a high-quality budgeting system in an enterprise becomes the key to high competitiveness of a business.