What is Budgeting?

Budget preparation refers to the formulation, determination and organization of budget revenue and expenditure plans. Including: (1) Generation of unit budget. (2) The budget covers the business scope. (3) Collecting drafts of general budgets at all levels. (4) Compile the national budget. The activities in the four aspects mentioned above are based on bottom-up and top-down two tops and two bottoms, so that grass-roots proposals are gathered at the central level, central policies and policies are implemented at the grass-roots level, and the entire budgeting activities are coordinated and unified. ^[1]

budgetary planning

(Establishment, determination and organization of budget revenue and expenditure plans)

Determining the starting point of a comprehensive budget before the actual operation of budget preparation is the first problem that any budgeting organization should solve.

The sales-based budgeting model refers to the preparation of sales budgets as the starting point.

Budget preparation process and content

The contents and communication methods of the budget meeting

One of the difficulties in budgeting-sales budget

Sales budgeting

Common sales budget methods and their drawbacks

Sales budget analysis process and content

Research on Historical Sales Behavior Research on Future Sales Behavior

Differences and results of historical future comparison

Sales budget quantification method

Forecasts based on historical data

Forecasting by linear analysis and regression analysis

Trend analysis forecast

Time linear analysis and prediction

Seasonal change-based forecasts

Control of Uncertain Factors by Probability Method and Sensitivity Analysis

Case study: How to use the above methods to complete the sales budget

Matching sales budgets and strategies in emerging markets

The Pros and Cons of Liberal Opportunism Without Strategic Budget and Its Application

How budgets can motivate sales

Difficulties in Budgeting-Production Budget and Inventory Management

Preparation of production budget

Management cost of inventory

Embarrassment of inventory management under sales budgets in emerging markets

Importance and difficulties of inventory management for global sales

Different results of fixed budget and variable budget in inventory management

How to use different budget methods to compile production budget and purchase budget under variable budget

Difficulties in Budget Preparation Part Three-How to Prepare Budgets for R & D and Other Projects

Difficulties in Budget Preparation Part 4-How to Prepare a Budget

1. Must be prepared according to the double budget method

Since the founding of the People's Republic of China until 1991, China's budget has adopted a single budget preparation method. Since 1992, the single budget preparation has been changed to the double budget preparation. This is an important reform fruit of the financial management system. The "Budget Law" consolidates this achievement in the form of law, clearly specifying the central budget and the budget preparation of local governments at all levels.

2.Practice the principle of balance between income and expenditure and balance of income and expenditure

The Budget Law requires the central government's public budget to run no deficit. Part of the funds necessary for construction investment in the central budget can be raised by borrowing domestic and foreign debts, but the borrowing should have a reasonable size and structure. Local budgets at all levels are prepared in accordance with the principle of balance between income and expenditure, and the balance of revenues and expenditures, without deficits. Except as otherwise provided by law and the State Council, local governments may not issue local government bonds.

3. Should be compatible with the growth rate of GNP

The compilation of budget revenues at all levels should be commensurate with the growth rate of GNP. According to regulations, revenues that must be included in the budget must not be concealed or underlined, and abnormal income from the previous year must not be used as the basis for budget preparation. The central budget and the budgets of local governments at all levels should be compiled with reference to the budget implementation of the previous year and the revenue and expenditure rules for the current year.

4. We should implement the policy of practicing economy, building the country with thrift.

The "Budget Law" requires the formulation of budget expenditures at all levels to implement the principles of economy, diligence and frugality.

5. Make overall plans, ensure focus, and arrange properly

The preparation of budget expenditures at all levels shall be balanced and ensured to ensure the focus, and other budget expenditures shall be properly arranged on the premise of ensuring the reasonable needs of government public expenditures. The central budget and relevant local government budgets arrange the necessary funds to assist the underdeveloped ethnic autonomous areas, revolutionary old base areas, remote and poor areas to develop economic and cultural construction. Government budgets at all levels should set up reserve fees in accordance with 1% to 3% of the government budget expenditures at this level, which will be used for natural disaster relief expenditures and other unforeseen special expenditures in the implementation of the current budget.

6. The budget revolving fund should be set up according to regulations

The budgets of governments at all levels shall be in accordance with the provisions of the State Council on budget revolving funds. The balances of the budgets of the governments at all levels for the previous year can be used in the next year for the expenditures carried over from the previous year; if there is a balance, the budget working capital can be supplemented; if there is a balance, it can be used for the necessary budget expenditure for the next year.

Method of budgeting:

The budget can be prepared according to different budget items using corresponding methods. The main methods are:

Fixed budget

Concept: also known as static budget, is a budget prepared based on a normal and achievable level of a certain business volume during the budget period.

Features: It is the budget made by this method. How much is calculated, the amount is generally unchanged. Therefore, it is suitable for budget items with fixed expenses or relatively stable amounts.

2. Flexible budget

Concept: Based on the customary classification of costs (expenses), based on the habitual relationship between volume, cost, and profit, and considering the possible change in business volume during the planning period, a set of costs that adapt to multiple business volumes is compiled. budget.

Features: It is to reflect the level of expenses payable under different business situations, and it is generated to make up for the shortcomings of the fixed budget.

Application of fixed budget and flexible budget

(1) Determine the fixed cost (expense) and variable cost (expense) items

The determination of these projects should be divided according to the actual business situation. If the person in charge of the financial department cannot be determined, the opinions of the heads of other departments should be adopted.

(2) Select the compilation method

For fixed costs (expenses), use a fixed budgeting method;

For variable costs (expenses), a flexible budgeting method is used.

(3) The total of the fixed cost (expense) and variable cost (expense) in the budget is the total budget amount.

Different enterprises have different standards and methods for dividing fixed costs (expenses) and variable costs (expenses). Keep in mind that they are determined based on the actual situation of the enterprise; otherwise, the prepared budget will be very different from the actual one.

For a company's managers, its definition of the nature of daily expenses incurred by the company is an important indicator of its ability to assess business management.

3. Incremental budget

Concept: This budget is based on the cost of the previous period, based on the estimated business situation, and combined with management needs, adjust the related cost items.

4. Zero-based budget

Concept: Zero-based budgeting simply means that everything starts from scratch, irrespective of previously incurred expense items and their amounts. Examine the content of each expense within the budget period and whether the expenditure standard is reasonable from the actual needs, and prepare the expense budget on the basis of comprehensive balance.

(1) Advantages of Zero-Based Budget

Reasonable and effective resource allocation;

It is helpful for communication and coordination within the enterprise, and encourages the enthusiasm and initiative of the grassroots units to participate in the budget;

clear goals, different priorities;

It helps to improve the input-output awareness of managers;

It is particularly suitable for service sectors with difficult to identify outputs, and overcome the shortcomings of wasted funds.

(2) Disadvantages of Zero-Based Budget

A poorly performing manager will consider the zero-based budget as a threat to him and therefore refuses to accept it;

The workload is large and the cost is expensive;

Ratings and resource allocation are subjective and easily cause conflicts between departments;

It is easy to cause people to pay attention to short-term interests and ignore the long-term interests of enterprises.

(3) Basic practice of zero-based budget

Dividing grass-roots budget units

Propose a plan for the business activities of the basic budget unit, and explain the purpose of each activity plan and the expenses that need to be expended.

The grass-roots budget unit makes a detailed analysis of its own business activities and proposes a package business plan.

(4) The preparation of the zero-based budget must specify the following three points:

Determine the items and amounts that should be incurred during the planning period;

Divide unavoidable expenses and avoidable expenses;

Determine when the expense item occurs, whether it must be paid in the current period or can be postponed.

5. Regular budget and rolling budget

The regular budget is based on a constant accounting period. In most cases this period is one year and corresponds to the accounting period.

Rolling budget refers to separating the budget period from the accounting period when preparing the budget. As the budget is implemented, the budget is continuously supplemented and rolled back one by one to keep the budget period at a fixed length (usually 12 months). .

(1) Disadvantages of rolling budget

The budget period is long, so it is difficult to predict certain activities in the future budget period, which will cause various difficulties in the implementation of the budget;

Some activities foreseen in advance often change during the implementation of the budget, but the original budget has not been adjusted in time, which makes the original budget seem incompatible;

Due to the limitation of the budget period, the manager's decision-making horizon is limited to the activities in the remaining budget period, and the lack of long-term plans is not conducive to the long-term stable and orderly development of the enterprise.

(2) advantages of rolling budget

It can enable enterprise management authorities to make continuous plans for the business activities of the coming year, and often maintain a stable vision in the budget, rather than waiting for the end of the implementation of the original budget to rush to prepare a new budget, which is conducive to ensuring The operation and management of an enterprise can be carried out in a stable and orderly manner.