I. Concept of budget management

The Guiding Opinions on Implementing Financial Budget Management in Enterprises issued by the Ministry of Finance points out that comprehensive budget management is to use the budget to allocate, assess and control various financial and non-financial resources of various departments and units within the enterprise, so as to effectively organize and coordinate the production and business activities of the enterprise and achieve the established business objectives. The Ministry of Finance's "Guidelines for the Application of Internal Control in Enterprises No.15-Comprehensive Budget" points out that comprehensive budget refers to the budget arrangements made by enterprises for business activities, investment activities and financial activities in a certain period.

comprehensive budget management is a modern enterprise management model integrating strategic, systematic and people-oriented ideas. Through the integration of business, capital and information, clear and appropriate decentralization, authorization and strategy-driven performance evaluation, it can achieve the goals of rational allocation of resources, highly coordinated operations, effective implementation of strategies, continuous improvement of operations and steady increase of value.

second, the function of budget management

(a) planning function

The problems of enterprises are complicated. If they are not planned in advance, once they occur, I am afraid it will be difficult to remedy them. Budget is to urge members of the organization to predict various environmental variables in advance and take corresponding measures. Enterprises have unlimited goals, but limited resources. Therefore, planning is a selection process. Among various alternatives, the most favorable one is selected and implemented to achieve the greatest satisfaction of the enterprise.

(II) Control function

Planning and control are two corresponding aspects. If there is only planning without control, planning will become a mere formality; If there is only control without planning, there will be no basis for control. Therefore, planning and control must correspond and be inseparable. In the process of budget implementation, managers should always pay attention to all business activities, whether they deviate from the goal? Can deviation be tolerated? How to take the necessary measures to guide the correct action and continue to move towards the original goal. Through performance evaluation and effective feedback of information, we can understand the causes of differences, prescribe the right medicine and take corrective actions to achieve the goal.

(3) Communication function

Employees' participation in budget preparation can enable managers and employees to communicate with each other to reach an understanding and reduce obstacles to future implementation. Budgeting can make managers understand the needs and opinions of employees, and employees can also understand the expectations and attitudes of managers. Therefore, through communication and mutual understanding, employees can be urged to strive to achieve their goals.

(4) Coordination function

If each department is fragmented and holds its own opinions, it will inevitably lead to the disconnection between the plan and the target or the inconsistency of the departments. At this time, only by relying on the budget, we can strengthen the contact between departments and make overall use of the limited resources of the enterprise to maximize economic benefits.

At the same time, the budget can force managers at all levels to constantly examine and analyze the external environment, so as to make the best decision to adapt to the ever-changing environment.

(V) Incentive function

Enterprises should expand the level of participation in budgeting, actively encourage employees to provide opinions, promote the combination of employee goals and company goals, and successfully achieve organizational goals. The budget target should be reasonable and achievable, so as to effectively motivate employees' potential. The implementation of the budget should be coordinated with the implementation of the reward and punishment system, such as salary increase, promotion, satisfaction of employees' self-realization, etc., so as to urge employees to go all out to meet their personal ambitions and achieve corporate goals.

iii. principles of budget management

budget principles refer to the principles that must be followed in the process of budget management, so as to ensure that budget management plays the role of planning, control, coordination and assessment. In the process of budget management, the usual principles to be observed are:

Reliability principle: budgeting should be steady and reliable, and various risks should be prevented.

Rationality principle: Budgeting should be advanced and reasonable, and should reflect the budget level that can be achieved through hard work.

integrity principle: all businesses involving financial status, operating results and cash flow should be included in the budget for management.

unity principle: budget preparation shall be carried out according to the unified budget caliber, procedures and calculation basis of the enterprise to ensure vertical comparability.

principle of combining cost and benefit: budget management is meaningful only when the benefits achieved by budget management are greater than the costs caused by budget management. The cost of budget management includes the cost of budget execution and the risk cost of budget management. The benefit of budget management consists of the management cost saved by the improvement of management efficiency brought by budget management and the direct benefit brought by the implementation of budget management (such as the reduction of cost during operation and the improvement of asset use efficiency).

iv. Budget management modes

There are many modes of comprehensive budget management, some of which focus on sales, some on cash flow, some on cost, and some on profit, as well as the newly emerging EVA-centered budget management mode and the budget management mode based on strategic map.

how to choose the budget management mode is the biggest problem that every enterprise faces when implementing budget control. It is generally believed that there is no so-called optimal model, and each enterprise should choose a budget management model suitable for its own characteristics according to its specific conditions.

V. Contents of budget management

The content system of budget management is the concrete embodiment of budget objectives, which usually consists of four parts: business budget (also called operating budget), capital budget (also called long-term investment budget), financing budget and financial budget, as shown in Figure 18-1.

Figure 18-1 Schematic Diagram of Budget Management Contents

VI. Budgeting Methods

There are six budgeting methods, namely, incremental budget and zero-based budget, flexible budget and fixed budget, regular budget and rolling budget. Different budget items can use different budget methods, and the same budget method can also be applied to different budget items. For example, the income budget can adopt incremental budget, and the depreciation expense of fixed assets in the cost budget can adopt fixed budget, while the preparation of expense budget is mainly based on zero-based budget method to ensure reasonable expenses.

(1) Incremental budget method and zero-based budget method

According to the characteristics of their starting point, the budgeting methods can be divided into two categories: incremental budget method and zero-based budget method.

1. incremental budget method

incremental budget method, also known as adjustment budget method, refers to the method of analyzing the changes of business volume and related influencing factors in the budget period based on the base period level, and preparing relevant budgets by adjusting the items and amounts in the base period.

the preconditions of incremental budgeting method are: (1) existing business activities are necessary for enterprises; (2) The original businesses are reasonable.

The disadvantage of the incremental budget method is that when the situation in the budget period changes, the budget amount is interfered by unreasonable factors in the base period, which may lead to inaccurate budget and is not conducive to mobilizing the enthusiasm of various ministries to achieve budget goals.

2. Zero-based budgeting method

Zero-based budgeting method is a "zero-based budgeting" method. When using zero-based budgeting method, expense items and expense amounts in previous periods are not considered, and the expense budget is prepared in a comprehensive and balanced way mainly according to the needs and possibility of the budget period.

The advantage of using zero-based budgeting method to prepare expense budget is that it is not restricted by the previous expense items and expense levels, and can mobilize the enthusiasm of all departments to reduce expenses. But its disadvantage is that the workload is large.

(II) Fixed Budget Method and Flexible Budget Method

According to the different quantitative characteristics of the business volume base, the budgeting methods can be divided into fixed budget method and flexible budget method.

1. fixed budget method

fixed budget method, also known as static budget method, refers to the method of budgeting only based on a certain fixed business volume (such as production volume and sales volume) that is normal and achievable during the budget period.

the fixed budget method has the disadvantages of poor adaptability and comparability. Generally, it is suitable for enterprises with stable business operation, stable production and sales volume of products, and accurate prediction of product demand and product cost, and can also be used to prepare fixed cost budgets.

2. flexible budget method

flexible budget method, also known as dynamic budget method, is a series of budget methods based on the analysis of cost behavior and the linkage relationship among business volume, cost and profit, and according to a series of possible business volume (such as production volume, sales volume, working hours, etc.) during the budget period.

in compiling flexible budget, we should choose a business volume measurement unit that best represents the level of production and business activities.

the scope of business volume adopted by the flexible budget method depends on the change of business volume of an enterprise or department, so that the actual business volume will not exceed the relevant business volume range. Generally speaking, it can be set between 71% and 111% of the normal production capacity, or the upper and lower limits are the highest and lowest business volume in history. The accuracy of flexible budgeting depends on the reliability of cost behavior analysis to a great extent.

Compared with the fixed budget compiled according to a specific business level, flexible budget has two remarkable characteristics: ① flexible budget is compiled according to a series of business levels, thus expanding the scope of application of the budget; (2) flexible budget is classified and listed according to cost types, and the budget cost of a certain actual business volume can be calculated in budget execution, which is convenient for the evaluation and assessment of budget execution.

The basic steps of budgeting with flexible budget method are as follows:

(1) Select the measurement unit of business volume;

(2) determine the applicable business scope;

(3) study and determine the quantitative relationship between various costs and business volume item by item;

(4) Calculate the budget costs and express them in a certain way.

the flexible budget method is divided into two specific methods: formula method

(1) formula method

formula method is a method to calculate the amount of cost and expenses in the budget period and prepare the cost and expenses budget by using the assembly model. According to the cost characteristics, the quantitative relationship between cost and business volume can be expressed by the formula:

y=a+bx

, where y represents the total cost of a certain budget, a represents the budgeted fixed cost of this cost summary, b represents the variable cost of the budget unit in this cost, and x represents the estimated business volume.

the advantage of the formula method is that it is convenient to calculate the budget cost of any business volume. However, the step cost and curve cost can only be corrected into straight lines by mathematical methods, and the formula method can be applied. If necessary, it is also necessary to explain the fixed fees and unit change fees applicable to different business scope in the Remarks.

(2) list method

list method is to divide the business volume into several levels within the expected business volume range, and then prepare the budget according to different business volume levels.

the advantages of the list method are: no matter how much the actual business volume is, the budget cost close to the business volume can be found without calculation; The ladder cost and curve cost in mixed cost can be calculated and filled in according to the natural model of assembly, and it is not necessary to modify them into approximate straight-line costs by mathematical methods. However, it is troublesome to use the interpolation method to calculate the "budget cost of actual business volume" when evaluating and assessing the actual cost by using the list method.

(III) Regular Budget Method and Rolling Budget Method

According to the different time characteristics of the budget period, the budgeting methods can be divided into two categories: regular budget method and rolling budget method.

1. Regular budget method

Regular budget method is a method of budgeting with fixed accounting period (such as year, quarter and month) as the budget period.

the periodic budget method is adopted to prepare the budget, so as to ensure that the budget period and the accounting period are matched in time, and it is convenient to assess and evaluate the implementation results of the budget according to the comparison between the data in the accounting report and the budget. However, it is not conducive to the budget convergence of each period before and after, and can not adapt to the continuous budget management of business activities.

2. rolling budget method

rolling budget method, also known as continuous budget method or perpetual budget method, is to adjust and prepare the next budget on the basis of the completion of the previous budget, and continuously roll back the budget period one by one, so as to keep a certain period span.

The rolling budget method is adopted to prepare the budget, which can be divided into monthly rolling, quarterly rolling and mixed rolling according to different rolling time units.

(1) monthly rolling mode

monthly rolling mode refers to the method of adjusting the budget once a month in the process of budgeting, with the month as the budgeting and rolling unit.

The monthly rolling budget is accurate, but the workload is heavy.

(2) Rolling by quarter

Rolling by quarter refers to the method of adjusting the budget once every quarter in the process of budgeting, which takes the quarter as the budgeting and rolling unit.

The workload of quarterly rolling budget is less than that of monthly rolling budget, but the accuracy is poor.

3. Mixed rolling

The mixed rolling mode refers to the method in which both months and quarters are used as the budgeting and rolling units during the budgeting process.

the theoretical basis of this budget method is that people's understanding of the future is characterized by a greater grasp of the near future and a smaller grasp of the long-term forecast.