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Budgeting Systems, Budgeting Systems - Coggle Diagram
Budgeting Systems
Budgeting Systems
Rolling Forecasts
Characteristics
Constant budgeting time period
Continuous updating approach
6-8 rolling quarterly forecast
Advantages
Focus on drivers of resources
Less detail
Less manipulation needed
Disadvantages
Hard to understand
Demotivating to workers
Requires constant revision on budgeting
Time-consuming
Many uncertainties when chaning budgets
Kaizen (改善) Budgeting
Characteristics
Based on continuous improvement
Cost reduction
Advantages
Deatiled knowledge of products
Detailed knowledge of the system
Encourage teamwork
No need to focus on short-term targets
Disadvantages
Long time investment in the pushing the budgeting culture
Hard to maintain continuous improvements
Activity-based Budgeting (ABB)
Characteristics
Based on activities
Advantages
Focus on value-added activities
Help with investment decision
Focus on process
Eliminate non-value-added events
Disadvantages
Only works along with up-to-date ABC system
Need management team to maintain the ABC system first
Process
(1) Calculate the 'current' budget cost per order
(2) Calculate the 'existing' customers' sales budget
(3) Calculate the budgeted sales order for new customers
(4) Calculate the total sales orders (exsisting+new customers)
(5) Calculate the new budget cost for the sales office
Zero-based Budgeting
Characteristics
Starts with scracth for every accounting period
Allocation of resources needed
Does not depend on past budgeted information
Advantages
Motivating staff
Bottom-up approach
Cost-effective
Eliminate unnecessary activities
Has clear objectives
Facilitates better communication in the team
Eliminate waste and inefficiency
Disadvantages
Time-consuming
Harder to manage for large company
Hard to edit or change once decision are made
Required high level of managers
Hard to justify each item
