WHY IS BUDGET PLANNING NECESSARY?
In healthy prepared budgets, not just good budget technique is enough, but additionally those that know the work well should be ready and be aware of external factors that could affect the budget. Budgets offer companies a planning guidance service. Because of budgeting, companies also provide useful information when making decisions and investigating differences. Budgeting makes a substantial contribution to the company in planning in the future again on the basis of the feedback occurring depending on the changing conditions.
If it’s feasible, fair and prepared with a wide participation, budgets will significantly raise the communication, loyalty and motivation between business owners and employees. Budgeting should be realized as a result of team work. Top-down budgeting is a kind of budgeting placed into effect by the most effective management in the organization. This technique can be an efficient means for the budget preparation process, but because the employees do not participate, such budgets could cause the employees to be indifferent and unwilling to fix the problems that could arise during the task done. Employees don’t feel an expression of ownership contrary to the budgets they’re not section of while preparing. In the bottom-up budgeting process, when budgeting with wide participation, the requirements and requirements of every department will soon be determined more clearly in accordance with its department success and company goals. Because employees donate to the synthesis of themselves, sometimes they could own this budget prepared around they own. This practice ought to be balanced. The utmost effective management will have to create a roadmap, whichever model budget it will use. It is extremely very important to implement an incentive system for folks or personnel who meet or achieve budget targets. they can show their situation better than the present situation, and they could spend significantly less than their expenses to be able to get incentives. At the same time, the opposite may not happen because it will discourage in very xor budgets. It can also be important that they adopt the budget planning, which is an estimate of the future, as helpful information, and that they do not think that this budget planning will not change or be stretched. If opportunities arise, conditions change, invisible situations develop, there’s no basis for the budget to be an obstacle to finding and using the benefits of such opportunities. To be able to control the preparation and realization of budgets, many companies form a budget department or budget implementation commission. Also, the budget plays a part in the communication of different departments and the development of the information communication network. Sales, production, domestic purchasing, external purchasing, engineering, Other departments such as for example planning and inventory control, import, industrial relations, sales marketing, warehouse, computing, accounting, financing, quality control, logistics will take their steps according for their departments’budget targets. This participation provides an appropriate ground for achieving a harmonious goal for different departments to communicate together before the budget is finalized. It’s very difficult to fairly share success when the goals of the employees aren’t taken into account. The budget completion phase begins with the acceptance of the relevant departments’budget targets and the approval and signing of the budget planning agreed to the senior managers. Changes in the business’s production mix, sales targets and prices, changes in labor fees, post-sales returns. In case the conditions change with respect to the engineering requirements, important changes in operating expenses, a budget revision should be made.
The change and development process faced by businesses,
It causes a rapid change in nearly every area until the organizational structures. The rapid change of consumer preferences, the synthesis of global markets and international competition enterprises have directed new techniques and insights to apply. These techniques and insights derive from total quality, activity-based costs, restructuring, benchmarking, target and kaizen.
cost and so on. In this kind of environment, strategic planning and control is among the most basic need of businesses. However, traditional budgets, which are area of the traditional management approach, have now been unable to realize the expected benefits from the newest production environment and have already been inadequate.
On the basis of the undeniable fact that the traditional budgeting approach is insufficient, studies have already been initiated on the foundation of both theorists and enterprises to eradicate this deficiency and modern budgeting methods suited to the current production environment have been developed. One of these brilliant methods is kaizen budgeting, which really is a part and extension of the sum total quality management approach. In this study, kaizen budgeting will undoubtedly be handled and examined in detail.