In Excel you can quickly check how the company's budget is being executed

Greetings!

I’m with you again, financial expert of the Papa Help magazine – Alla Prosyukova.

This article will talk about budgeting, or more precisely, about two main types of budgets - BDR and BDDS.

I will tell you:

• what is hidden behind this abbreviation;
• who needs it and why.

I will explain the algorithm for drawing up both budgets using practical examples.

Of course, after reading the article you will not become super-financiers; you will not be able to draw up a budget for your company with a snap of your fingers. But you will definitely approach this process more consciously and master its basics!

So here I go! Are you with me?!

What are BDR and BDDS and why are they needed?

Every owner of a small or large company wants to know how profitable his business is, what the real financial state of the enterprise is at one time or another, what income/expenses should be expected in the future, how much money needs to be invested to increase the profitability of the business.

It is for these purposes that budgeting is used - planning, distribution, management and control of the company’s financial and material flows based on budgets drawn up depending on the intended goals.

The income and expenditure budget (IBD) and the cash flow budget (CFB) are the most commonly used budgets in practice.

In the first case, all income and expenses of the enterprise are calculated and planned. Thus, interested parties will be able to look at their composition in the current and forecast periods, evaluate the efficiency of the company’s activities, and determine the presence/absence of profit.

This document is very similar in structure and essence to a unified report on financial results. In general, it includes the following data:

The composition of indicators is detailed depending on the type of activity and size of the company. The result of the formation of this budget will be the predicted amount of profit and profitability.

BDDS is a document that records everything related to the movement of the company’s funds, both cash and non-cash.

The structure of the BDDS is as follows.

The primary objective of such a budget is to prevent a shortage of funds to pay for the company’s urgent needs.

Example

There are 1,300,000 rubles in the current account of Luch LLC. The company urgently needs to pay the invoice this month to the supplier for materials for the production of products in the amount of 1,420,000 rubles.

According to the plan, funds in the amount of 500,000 rubles are expected to arrive from the buyer in the coming days. In this case, there will be enough money to pay the bill.

However, if the buyer does not transfer the money on time, it will not be possible to pay for the materials, which means that the production will not fulfill the production plan, and the company will receive less revenue.

To prevent this from happening, when creating a BDDS, company specialists must plan receipts/payments in such a way as to exclude such situations.

Application-contractual methodology for forming BDDS

https://www.youtube.com/watch{q}v=IImXPhiQRWU

The traditional method of forming the expenditure part of the Cash Flow Budget, for example, described in the works of K. Shchiborshch[3] or V. Khrutsky[1], allows the formation of a cash flow budget for a period of several months to a year, but is not always suitable for the needs of operational ( short-term) planning for up to 1 month.

In this regard, the authors propose, in addition to the traditional methodology, an application-contractual methodology, which involves the formation of a cash flow budget and a payment calendar (which refers to the schedule of receipts of funds and payments of the enterprise) based on applications for the expenditure of funds.

Figure 1 Application and contractual methodology for the formation of BDDS

When planning cash receipts (block 1 in Fig. 1), the estimated cash receipts are calculated based on the available planned income data for a given period and the possible repayment of receivables by customers (Receipts).

The calculation of receipts is carried out taking into account the established practice of relationships with customers. To do this, using, for example, statistical methods, an analysis of the current activities of the enterprise is carried out and the following indicators are determined:

• receivables repayment terms;
• the percentage of incoming advances from the total amount of products (goods) sold;
• the time period from receipt of advances to the fulfillment by the enterprise of relevant obligations;
• percentage of “bad” debts in the total share of invoices presented to customers.

These indicators are calculated for each type of activity by groups of counterparties. To do this, you can use the company's accounting database.

Payments = Beginning Balance Receipts – End Balance – Reserve, where

• Beginning balance - actual (in the absence of such data - planned) cash balance at the beginning of the planning period;
• Balance con – the planned cash balance at the end of the planning period;
• Reserve – a reserve of funds for unplanned, emergency payments.

Planning of cash payments is carried out on the basis of approved applications and contracts (block 2 in Fig. 1). Within the framework of this methodology, it is assumed that a database of agreements will be created in which all financial and business agreements concluded with the enterprise are registered. An application document is intended for planning cash payments based on one-time relationships with counterparties that are not formalized in contracts (an approximate format for the tabular part of the application is given in Table 3).

Table 3 Application format

The frequency of drawing up requests corresponds to the frequency of budget planning. When using several plans with different intervals, applications are drawn up for each period.

Upon receipt of applications for all structural divisions of the Enterprise, an analysis of the received data is carried out. Drawing up a cash payment schedule is carried out in two stages:

• determining the purpose of payments;
• determination of payment dates.

At the first stage, after determining the maximum amount of payments (Payments), the highest priority payment items are selected. If the maximum payment amount is not enough to cover your highest priority (obligatory payment) items, then a conclusion is made about the need to obtain a loan in the amount necessary to pay these expenses. Credits and borrowings increase the Company's income for the planned period, but increase payments for subsequent periods.

At the second stage, payment dates are determined. To do this, a cash receipt schedule is drawn up, on the basis of which the cash balance for each planning step is determined (minimum, indivisible planning period - for example, a day, a week, etc.).

Table. 4 Form of cash flow calendar plan

Initially, the terms of the highest priority payment items are determined based on the required payment terms and the Company’s capabilities to fulfill these obligations. Next, payment terms are determined for the remaining items, starting with the highest priority items and ending with lower priority ones. At the same time, cash gaps are monitored, i.e. absence of periods with negative balances at the beginning and end of the period.

In addition, the amount of payments by item is formed taking into account expense limits for each division, established on the basis of the planned budget and investment budget (block 3 in Fig. 1). If the payments are appropriate and necessary, a decision is made to make adjustments to the BDR and the investment budget.

After selecting the items and determining the payment terms, the divisions’ application fields are filled in, confirming the payment of the selected items within a certain time frame in the planned amount and quantity. In table 5 shows the columns of the tabular part of the application, filled out by the person responsible for determining the terms and items of payments.

Table 5

Applications with approved deadlines and payment items are returned to the heads of the department. When generating applications for the next period, department heads have the right to again indicate in the application items that were not passed (did not receive confirmation of payment) in previous periods. Based on the report on approved applications (payment schedule), as well as the cash receipt schedule, a payment calendar is formed, and based on the latter - BDDS (block 4 in Fig. 1).

An important aspect of the proposed methodology, along with the compilation technology, is the organization of planning work. The methodology for forming the BDDS should be part of the planning regulations at the enterprise (to be enshrined in internal regulatory documents) and be mandatory for use for all departments.

Applications for the period, grouped and displayed in the form of a report by department, are submitted to the manager responsible for the expenditure of funds. The report is analyzed by priority of applications, by expense items, by type of activity, and for each line of the application the amount and date of payment for applications are indicated. Unapproved applications must be submitted the following month along with new applications.

When organizing planning, it is necessary to provide for control operations:

• compliance of BDDS articles with limits (determined by the BDDS and investment budget);
• the feasibility of the costs and overruns (comparison with the production program);
• limit on cash balances at the end of the period in case of unforeseen expenses;
• control of the absence of “cash” gaps.

Control is carried out in accordance with the planning regulations, the main principles of which are:

• compliance of submitted applications with the financial plan;
• making payments based on written requests from the initiating services;
• funds are transferred in accordance with the payment register approved by the Financial Director.

Applications for payment submitted by departments in excess of the plan are paid only with the permission of the General Director (or the person replacing him).

When “cash gaps” arise (i.e. a situation when the expenditure side of the budget exceeds the revenue side, and the final cash balance on a specific date becomes negative), measures are taken to eliminate them - a decision to “cut” expenses (or shift expenses over time) or obtaining a bank loan.

The proposed algorithm for forming a cash flow budget was successfully applied at a large enterprise supplying network gas, OJSC Sverdlovskoblgaz.

The application of the technique showed that the technique has the following advantages:

1. Simplicity. The technique is quite simple to use and implement in production.
2. Credibility. Reliability is achieved due to the fact that data is presented only on actually necessary costs, and all departments of the enterprise participate in planning.
3. Visibility. Performers promptly receive a report on approved and unapproved expenses.

What are the differences between BDR and BDDS?

These 2 budgets have different goals.

BDR is created to analyze the performance of a company, forecast profits and manage costs.

BDDS is intended primarily to eliminate cash gaps, to assess the need for borrowed funds, plan the fulfillment of obligations to the tax authorities and suppliers, and optimize the procurement plan based on available funds.

The methods for compiling them are also different. The BDR is formed using the accrual method, i.e. expenses and income are reflected at the time they are actually incurred. While BDDS is based on the cash method: data is included in it only after funds are debited/received to the company’s accounts or to the cash desk.

Table of expenses and income of the family budget in Excel

Why control the family budget?

The benefit of controlling financial flow is obvious - it is cost reduction. The more you save, the more confidence you have in the future. The money you save can be used to create a financial cushion that will allow you to feel comfortable for a while, for example, if you are unemployed.

The main enemy on the path of financial control is laziness. People first get excited about the idea of ​​controlling the family budget, but then quickly cool down and lose interest in their finances. To avoid this effect, you need to acquire a new habit - constantly control your expenses.

The most difficult period is the first month. Then control becomes a habit, and you continue to act automatically. In addition, you will see the fruits of your “labor” immediately - your expenses will be amazingly reduced.

You will personally see that some expenses were unnecessary and can be abandoned without harm to the family.

Accounting for family expenses and income in an Excel spreadsheet

If you are new to creating a family budget, then before using powerful and paid tools for home accounting, try maintaining your family budget in a simple Excel spreadsheet.

The benefits of such a solution are obvious - you do not spend money on programs, and try your hand at controlling finances.

On the other hand, if you bought the program, then this will stimulate you - since you spent money, then you need to keep records.

It is better to start drawing up a family budget in a simple table in which everything is clear to you. Over time, you can complicate and supplement it.

Programs for home accounting In this review, we present the results of testing five programs for home accounting. All these programs run on Windows OS. Each application was installed on a computer and tested according to several parameters.

Budget of income and expenses - method of preparation + examples

Now let's move from theory to practice!

For a better understanding, the BDR formation diagram will help us.

The process of forming a BDD, as we see, is multi-stage. In this article, we will consider only the main ones, those that usually raise the most questions.

Stage 1. Calculate expenses

We start forming a BDR by planning expenses. I advise you to do this according to a “bottom-up” scheme with constant feedback.

According to it, the calculation of forecast expenses begins at the department level, after which the finished figures with their justification are sent to the financial manager, where they are distributed among the items in the “Expenses” section.

This part includes:

The expenditure project is prepared by the company's accounting service based on statistical information for the previous period. Then it is submitted for approval to the head of the Central Federal District (Financial Responsibility Center) to make proposals for additional costs that may arise in the planning period.

In the approved BRD, costs can be adjusted based on requests from the Central Federal District. Typically, centers provide such requests once a quarter. Increases in expenses must be justified. If the increase in costs exceeds the limit established by the company for these purposes (usually 10-15% of the plan), then approval will be required from the chief accountant and general director.

Stage 2. Calculate income

Before calculating and planning income, it is necessary to understand the types of activities of the company, determine which of them are the main ones and which others.

Then all income is divided and planned according to:

• types of products, services, goods;
• markets (internal/external);
• types of currencies (rubles, dollars, euros, etc.)

Let's say Monolit LLC produces and sells 2 types of products: bricks and aerated concrete blocks. This means that the articles “Sale of bricks” and “Sale of aerated concrete blocks” will appear in the BDR.

Thus, we subdivide and calculate all other receipts.

When drawing up the revenue side of the budget, the results of the last year’s BDR implementation, data from income plans and company development plans, presented by structural divisions, are taken into account.

Important!

The income part of the BDR after its approval can be changed only by decision of the General Director.

Stage 3. Determine profit

Having calculated income and expenses, we move on to determining the amount of profit. To do this, the expenses received are subtracted from the planned income.

Depending on what expenses we minus, we get the amount of one or another type of profit: gross, marginal.

Stage 4. Planning profit

Profit is the main goal of any commercial organization. Having information about planned income/expenses, you can derive the rate of profit - a value below which you cannot fall.

The BDR does not provide for loss planning. The extreme mark of the planned profit is zero.

Stage 5. Compiling a report

The logical conclusion of all calculations will be the budget of income and expenses. We will post all the obtained values ​​into the BDR form approved by the company.

Remember, its structure depends on the type of activity, the size of the business and the type of company?

To give you a clearer idea, below I have presented the BDR of a small company.

What is management accounting and why is it needed?

Today there is no legally fixed concept of management accounting - in contrast to accounting, which has always been regulated by the state (Soviet, then Russian) since pre-war times.
Many domestic executives and managers still believe that management accounting is mandatory, but this is not the case. Apparently, this is due to a misunderstanding that it is not accounting in the narrow sense of the word, but includes control, management analysis and planning based on them.

Separate management accounting arose due to the need of decision makers for operational information - which ordinary accounting cannot provide due to its cyclical nature, registration of already accomplished facts of economic life and strict legislative regulation.

Unlike accounting, management accounting (including) uses economic planning data and other information that is not confirmed by primary accounting documents. Therefore, it is much wider in scope and allows us to predict the future. The focus of accounting is the transactions of past periods and the financial results already obtained.

The foreign approach to management accounting is associated with the use of a system of national or international accounting standards (for example, US GAAP or IFRS). The use of algorithms of such a system makes it possible to apply certain processing procedures to the data of indicators of various business processes (for example, sales indicators, costs, etc.) (for example, calculation of costs, financial results, etc.), which are then compiled into management reporting. As a result, a set of indices is formed that are critical for the operational management of the enterprise.

The specificity of this is that such information is intended primarily for internal users (managers, financial services employees, etc.). This information may not be available to external users (owners, banks, lenders).

Cash flow budget - stages of preparation + examples

The algorithm for compiling a BDDS can be divided into 5 stages. Let's take a closer look at them.

Stage 1. Setting the cash balance

First, you need to determine the cash balance - the amount that the company should always have for operating activities and unforeseen expenses. This balance is also called irreducible .

Stage 2. Determination of the revenue part

Data for calculating the revenue side of the BDDS is taken from:

• sales budget;
• receivables repayment plan;
• calculations of income from investment;
• project of income from the financial activities of the enterprise (% of receipts, dividends).

Stage 3. Compilation of consumables

Information from the following budgets is used here:

Stage 4. Calculation of net cash flow

Simply put, NPV is the difference between income and expenses reflected in the document.

NPV can be calculated using 2 methods:

The direct method allows you to:

• keep the liquidity of assets and solvency of the company under control;
• quickly monitor the inflow/outflow of its funds.

The indirect method shows the relationship between cash flows and enterprise profits.

Depending on the obtained NPV result, the following conclusions can be drawn:

1. NPV > 0, the company is attractive to investors.
2. NPV < 0, the company is suffering losses, and is not of interest to investors.
3. The NPV is close to 0, there are not enough funds to increase the value of the company, investors are not interested in such an investment object.

Stage 5. Adjustment and approval

The finished draft budget is first sent to all responsible persons for approval. Next, the agreed document is approved by a specially created budget commission of the enterprise. On the appointed day, the commission meets to discuss and make a decision.

If comments are made during the discussion, the document is sent for revision. After which the approval procedure is repeated.

Below is an example of a ready-made BDDS for our small conditional organization “XXX”.

The current BDDS (BDR) can also be adjusted.

In practice, the algorithm usually looks like this:

1. The financial manager receives an order from the general director to adjust the current budget.
2. The employee prepares a draft of the adjusted document and sends it to the heads of the Central Federal District for review and making proposals.
3. The finished project is sent to the general director for approval.
4. The agreed project is sent to the financial manager to prepare a set of documentation (project + financial analysis) for approval by the budget commission.
5. The Budget Commission reviews the adjusted budget. If there are no comments, he approves it. Otherwise, the document is sent for revision.

Special points on BDR

By determining your sales budget and projecting it onto your income and expense budget, you can determine how much profit you can make each month as you move into the budget period. Drawing up a BDR consists of the following stages:

1. Understanding your business

. They say that a journey of a thousand miles begins with one step. The first step before you begin your journey to profitability is to understand your business. Involving key personnel directly executing your strategic plans increases your chances of success. This will also ensure that your budget aligns with your goals and ensures that it is compiled and reviewed by the appropriate people.

2. Documenting the process.

Be sure to document your annual budget process to set standards and ensure the process is correct. Processes may include the following steps:

• review monthly profit and loss statements for the previous year;
• if necessary, modify monthly data to reflect changes under the new plan, such as transactions, costs, and quantities;
• identify and correctly record assumptions made for the budget period;
• Enter and prepare your income and expense budget using templates. Various financial templates are available online for use. Choose the one that is most convenient for you.

3. Monitoring and managing the budget of income and expenses.

After preparing a budget of income and expenses, it is important to track the budget against actual results, which should give you information about how your business is performing and whether it is going to achieve the expected goals in your strategic plan.

• monthly results from your income statement should be compared with the results of your budget;
• any deviation, positive or negative, must be taken into account and action plans must be developed to resolve the problems;
• various information can greatly help you in revising your plan at critical moments so that strategic goals can be achieved.

4. Determination of cost of sales.

The calculation of how much you earn is determined by taking your total sales revenue minus your total sales cost. When determining your cost of sales, you need to follow the following process:

• determine the cost of producing your product. Will include your labor and material costs. Your cost to produce a product is the cost per unit. Unit cost is the gross cost you pay to obtain or produce a product. You can then calculate the price per unit, which again includes bills for utilities, equipment, repairs and maintenance, storage, packaging, shipping costs and staff commissions.
• Costs per unit, such as utility bills, can be calculated as the average monthly cost divided by the number of units expected to be sold per month. You now have an average estimated cost per unit.
• Breaking down your costs by budget month should help you determine your total sales cost for the month.
• Again, from your sales budget, get your projected number of units per month and divide your sales expenses by the number of sales. This gives you the selling price per unit.
• Adding the price per unit to your selling cost per unit gives you your total selling cost per unit.

5. Determination of gross profit.

Gross profit is the amount of money after subtracting costs. When calculating gross profit you must:

• get annual sales from your budget. Selling value is also called turnover;
• get the sales value from the previous section;
• subtract the cost of sales from your turnover to get your gross profit.

6. Receiving net profit.

Your gross profit is not your actual profit. To get what you actually make, subtract other costs indirectly associated with sales and unit production, such as:

• staff salaries, which include government contributions such as pensions and other insurance;
• office and property operating costs, including cleaning;
• marketing, public relations, media, advertising and exhibition expenses;
• professional fees such as legal, accounting or consulting fees;
• financial expenses, which include bank interest and fees

Indirect costs are also called overhead or fixed costs. These costs tend to change over time, so your budget should be realistic about the rising costs that may arise.

7. Calculate your cash flow.

Another factor that is largely underestimated when calculating your P&L budget is your cash flow.

Cash flow refers to the amount of money coming in and out of your company at the beginning of a period of time or the opening balance in relation to the final amount at the end of that period or the closing balance at the end of the period. Cash flow is considered either negative or positive.

Positive cash flow occurs when the closing balance is higher than the opening balance, which means your company's assets are growing or increasing. They say you can't make money if you don't spend money. Companies that post good profits but have negative cash flow may face problems in the long run.

Cash flow is the ability to pay out cash before doing anything in return. Therefore, when planning your budget, it is vital to include or list all of your business's cash inflows and outflows and the expected timing for each. The ability to control how cash flows in and out of your business affects your business's ability to pay off any debt at any time.

Who can help in drawing up the BDR and BDDS

In order for the finished budget to be truly informative and useful, its preparation should be done by professionals.

If your organization does not have such specialists on staff or their experience is insufficient to perform the assigned tasks efficiently, I advise you to seek help from consulting companies.

Most of them offer services for compiling BDR and BDDS.

What will you get from such cooperation?

First, save time and money. You don't need to purchase or understand budgeting software.

Secondly, a team of professionals will work on the budget and will be responsible for the quality of the resulting document.

And finally, thirdly, you will receive an audit of the company’s activities and recommendations for its further optimization.

Believe me, the money spent on services will quickly pay off! The most important thing is to choose the right performing company.

BDR components

Every business is unique and every industry has its own nuances, but these elements are general enough to apply to most industries.

Income

Income is usually broken down into components. It is possible to forecast revenue on an annualized basis, but typically requires more detailed information, breaking down revenue into its main components.

Income components typically include:

• volume (units, contracts, customers, products, etc.)
• price (average price, unit price, segment price, etc.)

Variable costs

Variable costs are the costs incurred in producing a product. As an example, variable costs include the cost of raw materials, energy and fuel, and wages of production workers. The amount of variable costs varies depending on the volume of output.

Variable costs often include:

• cost of goods sold;
• direct sales;
• trading commissions;
• payment processing fee;
• transportation of goods;
• some aspects of marketing;
• direct labor costs;

Fixed costs

These expenses do not change much with changes in revenue and are largely constant, at least within the time frame of the operating budget.

Examples of fixed costs include:

• rent;
• head office;
• insurance;
• telecommunications;
• salary and benefits management
• public utilities.

Non-cash costs

BDR often includes non-cash expenses such as depreciation and amortization. Although these expenses do not affect cash flow (other than taxes), they do affect financial reporting results (that is, the numbers a company reports at the end of the year on its income statement).

Where to find budgeting software + Excel spreadsheet for download

Nowadays you can find anything on the Internet, you just need to type the desired query into the search box.

I didn’t reinvent the wheel and used the same method. Having typed “Budgeting programs” in Yandex search, I received 7 million responses. Usually the first 10-15 sentences deserve attention. I chose 3 of them. Meet me!

1. Planior

This is an online service, which means there is no need to install a program; the work is done directly in the browser. With its help, users solve a wide range of budgeting problems.

Planior can:

• create a variety of budgets;
• analyze their implementation;
• automatically download actual data;
• predict company development scenarios, etc.

For all its versatility, the service has affordable tariffs.

I recommend watching the video review of the service:

2. “1C:ERP Enterprise Management”

The configuration is universal, suitable for small and medium businesses.

With its help you can:

• draw up financial plans based on available resources;
• set limits on the expenditure of funds and monitor their implementation;
• generate many different reports to analyze the actual and forecast financial condition of the company;
• arbitrarily configure the sources of used data;
• compare different plans and control for deviations.

And these are just some of the capabilities of the 1C:ERP Enterprise Management module. Find out more on the official 1C website or the websites of its partners, for example, Wiseadvice.

3. “Simple budgeting”

This is a product. Created specifically for management and control of enterprise activities.

Allows:

• see from all angles the financial model of the activities of an economic entity in the long term;
• increase the efficiency of the enterprise;
• get rid of routine paperwork and cumbersome calculations;
• draw up a budget and financial forecast;
• consolidate budgets;
• create a payment calendar;
• automate payment approvals.

4. Budgeting in Excel

The budgeting process using Excel spreadsheets is quite labor-intensive. Before drawing up, for example, a BDR, you will need to collect a lot of data, carry out additional calculations, and develop more than one functional budget (budget for sales, finished products, material costs, etc.). Then create a BDD template, write formulas and macros in it, and distribute the prepared information.

As you can see, there is a lot of work. Now imagine that this will have to be done for a large industrial enterprise with a large range of products, several current accounts, and active investment activities. Agree, what a challenge!

This is why I recommend automating company budgeting.

If your business is small and you still want to work in Excel, keep our table. Download and use!

Approaches to compiling a BDR

https://www.youtube.com/watch{q}v=lZP6jIrNRaM

There are two approaches to determining the composition of BDR articles – “top-down” and “bottom-up”.

“Top down” means that articles are set based on management requirements for data detail. The obvious disadvantage of this approach is that the articles may turn out to be too large.

In accordance with the second approach (“bottom up”), the list includes all income and expenses arising within the activities of each responsibility center. In this case, it is difficult to unify the list of items and identify duplicates; most likely, the budget will be overloaded with indicators.

A possible solution is to combine both approaches and follow this pattern:

• based on management requirements, set the general structure of the articles of the BDR, determine the articles necessary for analysis and making management decisions;
• for each responsibility center, create a list of articles corresponding to the business functions assigned to it.

Drawing up a forecast Balance sheet based on the BDR and BDDS sample in Excel

Budgeting example in Excel (organizational budget sample excel)

Figure 3. BDDS example in Excel (Cash flow budget example in Excel).

Figure 4. Budget budget example in Excel (Budget of income and expenses example of preparation in Excel).

This example is simplified as much as possible. But even from it it is clear that budgeting in Excel is a rather labor-intensive process, since it is necessary to collect all functional budgets and write formulas and macros to correctly display the final results. If you take a real enterprise, or even more so a holding structure, you can imagine how complicated the process of budgeting in Excel becomes.

An example of implementing Excel-based budgeting has many disadvantages: single-user mode, lack of ability to coordinate functional budgets, no differentiation of access to information, complexity of consolidation, etc. Thus, budgeting in Excel is not the optimal choice for a company.

Advice from the chief accountant when budgeting

Giving advice on budgeting is difficult. To benefit from them, you need to be deeply aware of the financial and economic activities of a particular enterprise and have a large amount of information from its management accounting.

However, I decided to give 2 universal pieces of advice that, in my opinion, are mandatory.

Tip 1. Don’t neglect the preparatory stage

Only preliminary preparation and adjustment of the budgeting system of your enterprise will allow you to obtain high-quality working budgets that are capable of solving the assigned tasks.

Develop a budget model, create a set of normative documentation to regulate the process, determine the composition of the data necessary for developing budgets, prepare a classifier of articles, designate the circle of responsible persons, their rights and responsibilities.

Secure everything in the Budgeting Regulations. You can use our template as a basis.

Tip 2: Use special software

You can also often find budgets drawn up in Excel. Personally, I myself often use this multifunctional program for various needs. However, progress has stepped far forward, and specialized software has appeared on the information market that can carry out budgeting much more efficiently and better, with less labor.

I talked about some of them above. There is plenty to choose from. For different needs and possibilities.

Such software:

• will save time;
• will increase the accuracy of calculations;
• will allow flexible customization of articles for any business;
• will make it possible to limit employee access;
• able to organize joint work.

I submitted the report and the boss accepted it! Dad helped!

Ready-made enterprise budget template in Excel

And so we have a ready-made enterprise budget model in Excel, which is dynamic. If the bonus limit is at the level of 200, and the bonus discount is 3%. This means that last year the client purchased 200 items. And at the end of the year he will receive a bonus discount of 3% of the cost. And if a client purchased 400 pieces of a certain product, it means that he has crossed the second limit of bonuses and already receives a 6% discount.

Under such conditions, the “Margin 2” indicator will change, that is, the distributor’s net profit!

The task of the head of a distribution company is to select the most optimal levels of boundary strips to provide discounts to customers. You need to choose so that the “Margin 2” indicator is at least within the range of 7% -8%.

(sample in Excel).

In order not to search for the best solution at random, and to avoid making mistakes, we recommend reading the following article. It describes how to make a simple and effective tool in Excel: Data table in Excel and matrix of numbers. Using the “data table” you can automatically visualize the most optimal conditions for the client and distributor.

• 3.1. Cash flow budget
• 3.2. Budget of Income and Expenditures (BI&R)
• 3.3. Settlement balance

3. Features and procedure for drawing up basic budgets

After the operational (functional) budgets have been drawn up, it is necessary to summarize the information that was obtained with their help to form the main budgets: the income and expenditure budget (I&R), the cash flow budget (CFB), and the settlement (planned) balance.

When drawing up basic budgets, the sequence of work on them is important.

The recommendations of domestic budgeting experts usually assume the following sequence for drawing up basic budgets:
Budgetary Budgetary Inspectorate - Budgetary Budgetary Inspectorate - Balance
This is explained by the fact that the process of drawing up basic budgets is designed to ensure a balance of current costs and current revenues, initial costs and external sources of cash flow, other investments and others sources of funds. This balance is achieved by close interaction of the main budgets with each other.

In the specialized and educational literature, the following arguments are given in defense of the proposed sequence of drawing up basic budgets:

Firstly, the budget of income and expenses (I&R) is more familiar to managers, economists, accountants (in the form of a profit and loss statement, financial results);

Secondly, BD&R not only shows the expected profitability of a business, but also sets the structure of production costs and current business costs;

Thirdly, in this budget, sales dynamics are usually presented “by shipment”, which is also more common for domestic managers, economists and accountants9.

Foreign experts with significant experience in organizing budgeting in market conditions suggest starting the preparation of basic budgets with a cash flow budget (CFB).1 They believe that the budget income statement and budget balance sheet include information contained in the operating (functional) budgets and cash flow budget.
Based on this, we will accept the procedure for drawing up budgets (and presenting it in the manual) according to the following scheme: BDDS - BDiR - Balance.
3.1. Cash flow budget

The funds of any organization are the most important resource in a market economy. An organization at any given moment may experience a shortage of funds, a lack of funds to ensure the appropriate level of financial and economic activity, or have an excess of funds on balance sheet accounts, which is also undesirable, since it means the inability of management to effectively use such a valuable resource. A cash flow budget helps an organization avoid unwanted downtime and cash shortages.

A cash flow budget allows an organization's managers to regulate cash flows (cash inflows or outflows) in such a way as to avoid having cash in excess of its current needs by transferring excess funds into short-term investments in advance. And, conversely, promptly identify cash shortages and cover the temporary deficit with a bank loan.

The general goal of a cash flow budget is to help managers manage their cash so that, on the one hand, they have the required amount of cash, and on the other hand, receive the highest possible income from investing temporarily free cash.

The cash flow budget as a planning document includes the expected receipt and expenditure of funds during the planning period. Income is formed according to the sources of funds, expenses - according to the direction of use. The expected cash balance is compared with the minimum amount of cash that is established by management, and which must be constantly maintained at the required level. The minimum amount of funds provides a kind of “buffer” to reduce the impact of unforeseen circumstances or miscalculations in planning.

Its value is also related to the level of business activity of the organization: it will be slightly greater during a period of high business activity than during a decline. To improve the efficiency of cash management, a certain part of the amount may be held in deposit accounts.

The development of a cash flow budget begins with identifying the sources and components of possible cash flows in the upcoming budget period. Only those funds or information from financial documents that can actually be received into a current account or otherwise during a given budget period are reflected here.

These sources can be of two types: external income (loans and investments) and internal (income from the sale of manufactured products, services and non-operating income).

When determining the volume of funds received for manufactured products in a given specific period (usually a month), it is necessary to keep in mind that the shipment of manufactured products does not coincide in time with the receipt of funds for them. As a result, accounts receivable are formed, which inevitably entails the inability to pay expenses incurred in the same period and the formation of accounts payable. This problem can be solved using a cash flow schedule, compiled as an appendix to the sales budget based on an analysis of concluded contracts for the supply of products. In addition, it is necessary to adjust the initial cash flow budget estimates to ensure sufficient funds for the functioning of the organization.

According to the direction of use, funds are divided into financing current operations, capital (initial) costs, and other expenses.

The article in the “current operations” section is determined by the specifics of the organization’s economic activities and its real financial position.

The content of the article “capital (initial) costs” is determined by specific auxiliary or special budgets.

Other expenses of the cash flow budget usually include the following items: interest payments on loans, repayment of loans and borrowings, dividend payments and other settlements with investors, settlements with the budget.

As a result of comparing all cash receipts and their use for the same period, a cash flow budget item is formed - cash growth or decrease in funds. Growth occurs when the receipt of funds exceeds their use, respectively, when the expenditure of funds exceeds their receipt for the same period.

The cash flow budget is compiled on the basis of the balance sheet method, so its first item is the opening balance (balance), and the last is the ending balance (balance).
In this case, the ending balance of the previous period is always the beginning balance for the next period. The ending balance of a given period is the algebraic sum of the opening balance and the cash increase or decrease for the same period. Final cash balance = opening balance + receipts – payments
Table 16 shows the cash flow budget compiled using conditional data.
Table 16
Cash flow budget for 200X

3.2. Budget of Income and Expenditures (BI&R)

The budget of income and expenses - financial plan - shows the ratio of all planned income from the sale of products (services) with all types of expenses that the organization is expected to incur during the planning period.

In other words, the budget of income and expenses is a document showing the relationship between costs and results of financial and economic activities for a certain planning (budget) period.

The main goal of the budget of income and expenses is to show the managers of the enterprise the effectiveness of the economic activities of each structural unit and the organization as a whole in the coming period, set limits (standards) for the main types of expenses, profits, analyze and determine reserves for generating and increasing profits, optimizing tax and other deductions in budget, formation of accumulation and consumption funds, etc.

Drawing up a budget for income and expenses must begin with the development of sales forecasts and a sales budget, then it is necessary to determine direct (variable) costs, which are reflected in three main items: a) payment for raw materials, goods, materials and components purchased from suppliers; b) payment of operating (production, maintenance) expenses directly related to the increase or decrease in sales volume; c) labor costs for key production personnel.

The necessary information for determining sales volume and direct (variable) costs is provided by operating budgets: the sales budget, the budget of direct material costs, the budget of direct labor costs (see tables 1, 8, 10).

In addition, information is added on current expenses (expenses for the period), other income and expenses and the amount of income tax.

The income and expense budget contains in a single format a plan for all profitable operations of the organization and thereby allows you to trace the impact of operating and other budgets on the annual profit budget.

If the net profit is small compared to sales or equity, the income and expense budget is revised.

Foreign experts call the budget of income and expenses a budgetary profit and loss statement. As part of the financial statements in domestic financial accounting, Form No. 2 of the same name “Profit and Loss Statement” is provided. However, as noted above, the purpose of drawing up a budget for income and expenses in its economic meaning is completely different and its format determines not only the system of target indicators, but also the content of other main budgets.

The income and expense budget allows you to understand the difference between profit and cash flow (information about cash receipts and payments). Profit recognition is based on the principle of accrual at the moment the rights to receive funds or obligations to pay them arise, which does not always coincide with the moment of receipt and payment of funds.

In addition, some items of the income and expense budget reflect non-cash expenses or income, for example, depreciation, the creation of a reserve for doubtful debts, which are not reflected in the cash flow budget.

Table 17 shows the budget of income and expenses using the example of conditional data.
Table 17
Budget of income and expenses (profits and losses) for 200X.

thousand units

3.3. Settlement balance

Settlement balance

is a forecast of the ratio of assets and liabilities (liabilities) of an organization (business, project, structural unit) in accordance with the existing (actual) structure of assets and liabilities and its changes in the process of implementing other budgets.

The purpose of the balance sheet is to show how the value of the organization will change as a result of engaging in this type of business, the economic activities of the organization as a whole or its individual structural unit during the budget period.

The balance sheet shows how much the cost of the resources of an organization, business or independent division with which they operate will increase in the upcoming budget period. It demonstrates the dynamics of asset values ​​and their viability.

Without a balance sheet, it is impossible to carry out a full financial analysis and calculate many financial ratios that are used to optimize the financial condition of an organization.

Experts in budgeting suggest developing a balance sheet using an international methodology, rather than using Form No. 1 and its modernized versions.

The current balance sheet differs from the balance sheet not only in format, but also in purpose. This can be seen when comparing individual points of a methodological nature.

The balance sheet is usually compiled according to an enlarged list of items, reflecting the most important types of assets and liabilities. The main feature of the settlement balance sheet format according to international standards is the arrangement of asset and liability items in descending order of their liquidity.

Sources of information for the accounting balance can be taken from accounting data and previously compiled operating and basic budgets.

Thus, information on the composition of non-current assets can be obtained from accounting data, as well as from the capital investment budget, which contains information on the acquisition and sale of these assets.

Tax obligations are reflected in the budget of income and expenses.

Information about a company's equity can be gleaned from documents relating to proposed issues and withdrawals of capital.

The forecast of retained earnings at the end of the current year includes retained earnings from previous years and earnings earned in the current year. Since the forecast balance for the next year is compiled after all other budgets at the end of the current financial year, the amount of retained earnings can already be estimated quite accurately.

The volume of finished goods and inventories can be found from the production and materials purchasing budgets, respectively. The stock of materials is calculated in the procurement budget (Table 7).

The bank overdraft is shown in the procurement budget and is equal to the bank account balance at the end of the budget year.

The volumes of receivables and payables can be determined based on information about the timing of receipts and payments, which are used in drawing up the cash flow budget.

In order to draw up a settlement balance, we will enter additional data for the conditional example.
Below is data on the organization's non-current assets. Table 18
Non-current assets of the organization in 2000

thousand units

Own capital and reserves in 2000 amounted to CU 13,960 thousand. For the settlement balance, accounts receivable were taken as 18% of the sales volume of the third quarter, 90% of the sales volume of the fourth quarter, current accounts payable will be 50% of the volume of purchases.

The settlement balance is compiled according to the enlarged nomenclature (Table 19)
Table 19
Format of the settlement balance for 200x.

thousand roubles.

The budget of income and expenses, the cash flow budget and the current balance must be submitted to the planning and financial commission (budget commission, budget committee) together with a number of financial ratios provided for by intra-company budgeting.

The ratios used in financial planning provide the organization's top management with information about the financial condition of a particular business (both in the past and in relation to budgeting in the future).

For budgeting purposes, ratios allow you to assess the projected financial position of the organization for the upcoming budget period. If, after reviewing the compiled budgets, these coefficients turn out to be acceptable, then the budgets are approved; if not, the budget must be revised

The set of coefficients necessary for these purposes is established by the organization’s management based on the targets of the budget process.

Experts in budgeting believe that, in relation to modern business conditions in Russia, it is most advisable to calculate the following groups of coefficients:

? – profitability;

? – production (operational) efficiency;

? – liquidity.

Profitability

the total is determined
by the return on total assets
and is calculated according to the formula:
RОА = (PE - PR) / OA,
where PE is net profit;

PR – expenses for paying interest on loans and borrowings;

OA – total assets on the balance sheet.

The addition of net income to interest payments in the numerator means that the efficiency of resource use does not depend on the method of financing the acquisition of assets. The higher the value of the indicator, the better the financial position of the organization.

If the return on total assets is greater than the bank interest rate, then business development is more profitable through a loan rather than reinvesting the profits.

In Russia, the value of this indicator should be no less than 15–20% when calculating in hard currency and no less than 35–40% in rubles (at the end of 2000).9

Return on Sales Ratio (RP)

calculated according to the budget of income and expenses (B&R).
It shows the share of net profit in sales revenue. RP = (Net retained earnings) / (Net net - sales revenue).
The value of this coefficient should be at least 15% (in Russia at the level of 22-25% as of 2000).

Production (operational) efficiency

characterized by
the total assets turnover ratio (TAT).
This indicator allows you to determine the number of turnover of total assets to achieve the sales volume:
OOA = BP / OA
where BP is net sales revenue;

OA – total assets on the current balance sheet.

The value of this coefficient, according to experts, should be at least 3-3.5. But the main meaning of this coefficient is not to achieve a standard value, but to prevent the value of this coefficient from decreasing over time, which means an increase in the probability (only the probability) of business bankruptcy. This indicator becomes most important for new types of business.

Liquidity

characterized
by current liquidity and absolute liquidity ratios
.

Current liquidity ratio (CL) – determined by the formula:
TL = TA / KO,
where TA – current assets;

KO – short-term liabilities.

This ratio characterizes the organization's ability to meet its short-term obligations. A rational current ratio should be around 2, within the range of 1.5-2.5. A significant deviation from these limits is a reason for a serious analysis of the liquidity of the organization's assets.

The absolute liquidity ratio (Kabs.l.) shows what part of short-term liabilities can be repaid immediately:
Kabs.l.
= (DS + LCB) / KO, where DS is the organization’s funds;

LTS – easily marketable securities;

KO – short-term liabilities.

Using information from budgets compiled according to the data of a conditional example, we calculate the given coefficients.

Overall profitability:
RОА = 28.6%
Return on sales:
RP = 27.5%
Total asset turnover ratio:
ОА = 1.04.
Current liquidity ratio:
TL = 3.0
Absolute liquidity ratio:
Kabs.l = 1.48.
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