BDR - what is it? Planning and cost management in the BDR: how to properly account for costs

At each enterprise, a management tool such as the budgeting of revenues and expenditures (hereinafter - BDR) should be actively used. What it is? Let's try to understand this article.

Basic Definitions

Each business entity is characterized by its own system of BDD depending on the choice of the financial planning strategy, as well as on the set goals. Therefore, when defining the BDR, what it is and what its purpose is, it is necessary to understand the fact that as management technologies in any company it is aimed at achieving its own goals and using its tools and tools.

Budgets are compiled for both the company as a whole and its individual units. Budgeting income and expenses is a work plan coordinated across all structural units that unites individual budgets and is characterized by an information flow for making managerial decisions in the area of financial planning. In this budget, the planned profit and cash flows are considered in summary terms. Thus, when answering the question about the BDR - what it is, it can be argued that this is the result of many discussions, as well as decision-making in the future about the fate of the enterprise, which contributes to its efficient operational and financial management.

Calculations, which are carried out during the formation of the budget, allow the timely and complete determination of the amount of money necessary to implement the decisions taken. In this case, we are talking about the formation of sources of receipt of these funds (for example, borrowed or own).

Evaluation of BDR efficiency

What is this concept, and how it can be evaluated, can be judged only in the breaded period. So, from the extent to which the degree of flexibility of the business entity is manifested, due to the foresight of the results of management actions, the effect of budget development depends. Financial planning and budgeting involves the definition of basic facilities for each individual line of activity of the entity, as well as the calculation of various options with the preparation of responses to the likely changes in the internal and external environment.

Budget Functions

These functions depend on the phase of the formation of the BDR and its implementation. At the very beginning of the reporting period, this financial document is a sales, expenses and other financial operations plan for the coming year. By the end of the reporting period, it already plays the role of an appraiser (measurer), through which it becomes possible to compare actual and planned indicators to make adjustments to the subsequent activities of the enterprise.

The functions of the CDM and BMD are similar and can be represented by the following list:

• Analytical (strategy correction, rethinking the idea, setting new goals and analyzing alternatives);
• Financial planning;
• Financial accounting (it is necessary to think over and take into account the actions already taken in the previous period to make the right decisions in the future);
• Financial control (comparison of tasks and results, identification of weaknesses and strengths);
• Motivational (comprehension of the formed plan, punishment in case of failure of its performance and encouragement in the performance and overfulfilment of it);
• Coordination;
• Communication (the coordination of planned indicators of structural divisions of the enterprise, finding of compromises and fastening of responsible executors for this or that point of the plan).

Comparison of CDBM and BDR

BDR (revenue and expenditure budget), like the BDDS (cash flow budget), are the main financial documents that must be presented, for example, to a banking institution when obtaining a loan. However, there is some difference between these two concepts:

• The BDDS uses the cash method, BDT - the accrual basis;
• BDT is the planning of net profit, and with the use of BDDS, cash flows are planned;
• In the BDR, digital material is reflected without such indirect taxes as VAT and excises, and in the BDDS all indicators are indicated taking into account these taxes;
• These two documents differ in structure: in the BDR there are articles relating to depreciation and revaluation, and in the BDS there are articles on obtaining and repaying borrowed funds;
• And, of course, the discrepancies in the appointment of these documents: BDR serves to calculate the planned cost, profitability, revenue and profits, and the BDDS is needed to track cash flows at the cash desk and settlement accounts of the enterprise.

The main stages of budgeting in the enterprise

The first stage is the formation of a financial structure and is aimed at developing a model of such a structure that would allow to establish responsibility for the execution of the budget itself, as well as control of sources of origin of incomes and costs.

The second stage implies the formation of a budget structure and is defined as a general scheme of the consolidated budget of the business entity. At this stage, particular attention should be paid to the items of expenditure in the enterprise budget.

Based on the results of the implementation of the third stage, the accounting and financial policies of the enterprise are being formed. In other words, a set of rules for the maintenance of accounting, operational and production records is created, taking into account the limitations adopted in the budgeting and monitoring of its implementation.

The fourth stage is connected with the development of procedures and procedures for monitoring, planning and analysis, in case of occurrence, the reasons for its non-fulfillment.

And, at last, the fifth stage is connected already with direct introduction of system of budgeting. Includes work, the implementation of which is related to the preparation of financial and operational budgets for the forthcoming period, the conduct of an appropriate analysis, based on the results of which some adjustments to budgets may often be made. As a result, the revenues and expenses of the enterprise must be adjusted to the required sizes.

Three approaches to the budgeting process

In the modern literature, three approaches are singled out, with the help of which the articles of the BDR are formed:

• "down up";
• "top down";
• combined.

The first approach is used at large enterprises, where the heads of structural divisions compile the budgets of divisions or sections, which later are reduced to the budgets of the shop or the plant as a whole. An obligatory condition for arranging the formation of the budget is the coordination by the heads of the middle level of the indicators with the top management of the company.

The example of the second approach shows that the budgeting process is carried out by the top management, and the managers of the lower level departments are attracted minimally.

The third approach is the most balanced and contributes to avoiding the negative consequences of the two previous approaches.

Advantages of budgeting

Like any economic phenomenon, budgeting has both positive and negative sides. The merits include:

• Promotes motivation and positive attitude of the team;
• Coordinates the work of the collective as a whole;
• Due to regularly conducted analysis, it is possible to correct the budget on time;
• Is a tool for comparing planned and actual results.

Disadvantages of budgeting

Among the main disadvantages are the following:

• Differences in the perception of budgets for different people;
• High cost and complexity of the budgeting process;
• The lack of motivation for the budget, if it is not brought to the knowledge of all employees.