WHY IS BUDGET PLANNING NECESSARY?
In healthy prepared budgets, not merely good budget technique is sufficient, but also people who know the job well should be ready and know about external factors that may affect the budget. Budgets offer companies a planning guidance service. Thanks to budgeting, companies also provide useful information when creating decisions and investigating differences. Budgeting makes a substantial contribution to the business in planning in the future again based on the feedback that develops with regards to the changing conditions.
If it’s feasible, fair and prepared with a broad participation, budgets will significantly increase the communication, loyalty and motivation between business owners and employees. Budgeting ought to be realized consequently of team work. Top-down budgeting is a kind of budgeting put into effect by the utmost effective management in the organization. This technique is an efficient way for the budget preparation process, but because the employees do not participate, such budgets may cause the employees to be indifferent and unwilling to fix the issues that may arise during the job done. Employees do not feel a sense of ownership from the budgets they’re not part 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 contribute to the formation of themselves, sometimes they can own this budget prepared around they own. This practice ought to be balanced. The utmost effective management will have to produce a roadmap, whichever model budget it’ll use. It is extremely very important to implement an incentive system for individuals or personnel who meet or achieve budget targets. they can show their situation a lot better than the existing situation, and they can spend significantly less than their expenses in order to get incentives. At once, the alternative may not happen because it will discourage in very xor budgets. It can be important they adopt the budget planning, which can be an estimate into the future, as helpful information, and that they cannot think that this budget planning won’t change or be stretched. If opportunities arise, conditions change, invisible situations develop, there’s no reason behind the budget to be an obstacle to finding and using the advantages of such opportunities. In order 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, All the departments such as for instance planning and inventory control, import, industrial relations, sales marketing, warehouse, computing, accounting, financing, quality control, logistics can 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 until the budget is finalized. It’s very difficult to share success once the goals of the employees are not 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 wanted to the senior managers. Changes in the company’s production mix, sales targets and prices, changes in labor fees, post-sales returns. Just in case the conditions change depending on 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 virtually every area before the organizational structures. The rapid change of consumer preferences, the formation of global markets and international competition enterprises have directed new techniques and insights to apply. These techniques and insights are based on 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 the main traditional management approach, have now been unable to realize the expected advantages from the new production environment and have now been inadequate.
On the basis of the proven fact that the standard budgeting approach is insufficient, studies have already been initiated on the basis of both theorists and enterprises to remove this deficiency and modern budgeting methods suitable for the modern production environment have been developed. One of these simple methods is kaizen budgeting, which is a part and extension of the total quality management approach. In this study, kaizen budgeting is going to be handled and examined in detail.