What is budgeting?

Budgeting – One of the management accounting tools, ensuring corporate goals . This is a process, which includes the development, Creation and approval of the budget , as well as its subsequent control. Budgeting – This is the result of planning plan for the development of the company indicating the goals and directions of its activities and methods of using resources. Budgeting – This is a quantitative assessment of assumptions, accepted in the plans, their specifications, And his task is, to assign specific measures and actions to places and the time of their implementation, responsible persons, as well as their control. Between planning, Budgeting and control – This is bilateral relations. The relationship makes it necessary to regularly review the assumptions made.

Budget – This is the financial plan of the enterprise, which represents the method of distribution of resources, cash or natural units, prepared for the period per year or for the time of the project, approved and implemented by employees of various levels of management. Budgets are fixed (are developed for one level of activity) And flexible (are created on the basis of analysis of factors of cost variability for various levels of activity).

Types of budgeting

Distinguished different types of budgeting:

• Sliding budgeting – creation of an accurate budget for the first quarter and a common budget for the remaining quarters;
• Increment – Creation of a budget based on data for the previous period, most often multiplied by the corresponding indicator, "from scratch" – budget compilation based on thorough analysis, as if it were implemented for this object for the first time;
• top down – budget development at the level of top managers;
• Partisipative budgeting – management develops company strategies, and employees are preparing partial budgets.

Stages of budget compilation

Budget compilation consists of:

• Development of budget assumptions,
• Preparation of the budget,
• Coordination and approval of the budget,
• Budget execution control,
• reaction to control results.

Budgeting functions

The functions of budget preparation include:

• Mobilization for periodic planning,
• Coordination of activities and cooperation,
• The ability to communicate intentions,
• ensuring grounds for monitoring and evaluating achievements,
• providing data for the development of motivation systems.

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