Designing a budgeting system
Posted: Sat Jan 18, 2025 7:12 am
The creation of a financial structure is determined by the size of the company and its specialization.
The budgeting system is one of the main components of the distribution of powers, responsibility and increasing the loyalty of the organization's personnel. Its structure includes financial responsibility centers (FRC), for each of which a local financial plan is drawn up, built after calculating and analyzing key economic indicators.
Before designing, it is necessary to study the relevant specialized documentation, evaluate communication between departments and prepare employees for the implementation of the budgeting system at the enterprise. After that, a financial model of the company's development is formed, taking into account all cash flows, which are influenced by many factors. Financial responsibility centers operate under the guidance of appointed persons who coordinate the efforts of managers and control the quality of execution.
Along with financial ratios, the budget self employed data package also contains natural indicators. Therefore, in the planning structure, it is possible to separately identify the responsibility center (RC), which is intended to reflect the management structure as a whole. At the same time, control over the compliance of economic parameters in its functions is not a priority, and in some cases it may be completely absent.
Let us present to your attention an example of the structure of a responsibility center in a company.
The decision-making center monitors all stages of the implementation process, recording and analyzing key indicators. For example, the administrative apparatus of the entire enterprise, the management of a department or project.
The accounting center provides a comparison of the deviation of the planned and actual values of the main coefficients. In a company, this function is often performed by the centralized accounting department.
The control center monitors and checks the implementation of all plan items. An example is the quality control department (QCD), which often also acts as a cost center.
The Analysis Center is responsible for developing the methodology and practical application of various methods for assessing changes in key parameters. The results of performance indicators allow for timely introduction of necessary adjustments and forecasting of events with a high degree of reliability. The Analytical Department must provide information to the relevant executive body (e.g., the Logistics Center) within the required timeframe.
The logistics center coordinates the system of resource movement both inside and outside the company (supply, product sales). The area of responsibility includes the movement of the international trade center, provision of raw materials, and personnel management. In organizations, various dispatch services act as logistics centers.
Thus, when budgeting an enterprise, the sources of information are the accounting center, and the collected information is processed and used in the control and analysis centers.
Designing a budgeting system
Source: shutterstock.com
The financial responsibility center is characterized by the features of the cost system or, conversely, sources of financial replenishment:
Cost center – structural divisions whose area of responsibility includes managing the company's expenses. For example, security agencies servicing the company's facilities that require protection, administrative and economic services, and the legal department.
Profit center – all departments directly involved in ensuring the enterprise’s marginality.
In many institutions, the sales departments for finished products act as revenue centers.
The budgeting system is one of the main components of the distribution of powers, responsibility and increasing the loyalty of the organization's personnel. Its structure includes financial responsibility centers (FRC), for each of which a local financial plan is drawn up, built after calculating and analyzing key economic indicators.
Before designing, it is necessary to study the relevant specialized documentation, evaluate communication between departments and prepare employees for the implementation of the budgeting system at the enterprise. After that, a financial model of the company's development is formed, taking into account all cash flows, which are influenced by many factors. Financial responsibility centers operate under the guidance of appointed persons who coordinate the efforts of managers and control the quality of execution.
Along with financial ratios, the budget self employed data package also contains natural indicators. Therefore, in the planning structure, it is possible to separately identify the responsibility center (RC), which is intended to reflect the management structure as a whole. At the same time, control over the compliance of economic parameters in its functions is not a priority, and in some cases it may be completely absent.
Let us present to your attention an example of the structure of a responsibility center in a company.
The decision-making center monitors all stages of the implementation process, recording and analyzing key indicators. For example, the administrative apparatus of the entire enterprise, the management of a department or project.
The accounting center provides a comparison of the deviation of the planned and actual values of the main coefficients. In a company, this function is often performed by the centralized accounting department.
The control center monitors and checks the implementation of all plan items. An example is the quality control department (QCD), which often also acts as a cost center.
The Analysis Center is responsible for developing the methodology and practical application of various methods for assessing changes in key parameters. The results of performance indicators allow for timely introduction of necessary adjustments and forecasting of events with a high degree of reliability. The Analytical Department must provide information to the relevant executive body (e.g., the Logistics Center) within the required timeframe.
The logistics center coordinates the system of resource movement both inside and outside the company (supply, product sales). The area of responsibility includes the movement of the international trade center, provision of raw materials, and personnel management. In organizations, various dispatch services act as logistics centers.
Thus, when budgeting an enterprise, the sources of information are the accounting center, and the collected information is processed and used in the control and analysis centers.
Designing a budgeting system
Source: shutterstock.com
The financial responsibility center is characterized by the features of the cost system or, conversely, sources of financial replenishment:
Cost center – structural divisions whose area of responsibility includes managing the company's expenses. For example, security agencies servicing the company's facilities that require protection, administrative and economic services, and the legal department.
Profit center – all departments directly involved in ensuring the enterprise’s marginality.
In many institutions, the sales departments for finished products act as revenue centers.