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BUDGETS - Coggle Diagram
BUDGETS
STAGES IN BUDGETING
prepare sales budget
initial prep pf other budgets
determining the restriction factor to output
negotiation w/ superiors
comm budget policy & guidelines to those
preparing their budgets
final acceptance
ongoing review
DISADVANTAGES
time consuming
fails to encourage continuous improvement
rigid, doesn't consider unforeseen events
conflicting roles in the budget
yearly restrictive
top-down approach - unrealistic budget likely
MUST spend budget (no goal congruency)
PURPOSES OF
BUDGETING
planning annual opertations
coordinating activities; ensuring harmony
comm plans to managers of diff
responsibility centers
motivation to achieve goals
controlling activities
performance evaluation of managers
ZERO BASED
Benefits
aims for effective resource use
eliminate past efficiencies
best for discretionary costs
creates questioning attitude
Problems
time consuming
costly implementation
people don't like change
each year start from scratch
questions each line item
not predetermined by previous commitment
OVERALL PLANNING
& CONTROL F/WORK
annual budgeting deals w/ detailed implementation
of the LT plan for that year
LT plan has preliminary targets & activities
required to achieve strategic plans and resources
needed
set w/in context of longer term plans
plan tends to be general, imprecise & subject
to change
CONSIDERATIONS FOR
SALES FORECAST
state of economy; seasonal fluctuations
stability of suppliers; advertising
& promotional campaigns
new legislation impact; competition
impact
historical performance; expansion into
international markets
NON-PROFIT ORGS
calc expected costs to maintain current activities
then add on any further developments
produce estimates for activities then find ways
to finance them or reduce to realistic lvls
difficult to quantify obj's and actual accomplishments
concerned w/ input of resources
CPU-BASED FINANCIAL
MODELS
math statements of inputs & outputs
relationships affecting the budget
sensitivity analysis ascertains effects
on master budget if data/assumptions
change
assists evaluating different options
before final budget approval