Budget planning - what is it?
Today, close attention is paid to modern methods of accounting, budget planning and forecasting. Budgeting is a method of production and financial planning of an object. The process goes through the creation of a general budget, as well as budgets of budget planning subsystems in order to determine their financial expenditures and the results of economic activity. The total budget is a quantitative expression of all plans required to achieve the desired results of the enterprise.
What is a budget?
In the classical sense, a budget is a collection of incomes and expenses of an economic object (country, enterprise, household, or individual citizen) for a designated period (year, month, etc.).
How does the budget differ from the plan? The budget has a pro forma nature: goal - planning - control. It is created at the points of financial responsibility and relies on the standards established by the object.
Essence of budgeting
Budget planning (budgeting) is the process of drawing up plans and further operational control over their execution, or rather, receipt and expenditure of funds.
Budgeting is always closely related to:
- management of an economic object;
- financial and industrial activities;
- management accounting.
Budget planning organizations, as a rule, carried out in the process of operational planning. Based on the objectives of the economic object, budgets solve the problem of resource allocation (economic, material, labor). Development and budgeting gives certainty to the chosen strategy of the company.
Why planning takes a fundamental place in the process of budgeting? In the budget process, planning plays a major role, because the quality and timing of its implementation depends on the correct definition of budget plan indicators.
Budget planning is a complex of organizational and methodological measures at all stages of budgeting to determine the volume indicators, their sources of formation, the directions of use of resources in order to achieve stable and successful development.
Stages of budgeting
Stages of budget planning:
- Drafting. This is the first stage of the budgeting process. It addresses the main issues: volume indicators of the budget, fiscal and monetary policy, basic methods and directions, the distribution of income and expenses between the links of budget planning subsystems.
- Consideration. At this stage, all actors are involved. In the process of reviewing the budget is the coordination of the interests of all levels of government for income and expenditure.
- Execution. This is the most difficult process. After the receipt of income in the process of budget execution begins spending.
The fundamental tasks of budgeting include:
- operational planning;
- ensuring coordination and communication of all subsystems within the system;
- justification of expenses of the object of economic planning;
- creating a base for monitoring the plans;
- execution of laws and contracts.
Principles of budgeting
The main principles of budget planning:
- definition of centers of economic responsibility for the specified features;
- alignment of objectives;
- the definition of priorities (the use of resources of the economic object in the most profitable direction);
- responsibility (each unit is responsible for the execution of budgets for certain indicators);
- continuity and consistency (the budgeting process is carried out on a regular basis, from one period to another);
- unification (drawing up budgetary regulations for each economic entity as a whole, depending on the specifics of its activities);
- compliance of budget indicators with accounting and management reporting;
- rationing (development, calculation and approval of standards for each article and centers of financial responsibility);
- balance (proportional consideration of the capabilities and resources of the object and the interrelation of the elements of income and expenses, taking into account the balances of resources).
Budget planning functions
Budgeting can perform the following functions:
- Economic forecast. Each object of financial activity needs to possess information, what goals in its work it can plan for the next period.
- Control.As plans are implemented, it is necessary to register the real financial results of the facility. By comparing actual and planned indicators, budget control can be exercised.
- Coordination. The budget is an action program expressed in value terms. It should be the coordination of all activities among themselves.
- Setting goals. Developing a budget for the subsequent period, the object makes a decision in advance, before the onset of the action period, plan them.
- Delegation of tasks. The coordination of the facility budget for its divisions is a signal that in the future, current decisions are made at their level decentralized, if they do not go beyond the general budget limits.
In order to plan the activities of the facilities, it is advisable to form a cross-cutting budget planning system consisting of functional budgets:
- wage fund;
- material costs;
- energy consumption;
- other expenses;
- loan repayment;
- payment of fiscal payments.
Budgets have different types and forms. Some of them characterize intermediate processes of activity, may carry information about costs or incomes.Consolidated budgets, such as a statement of financial performance, a cash flow budget, show both the costs and the revenues of the object as a whole.
Existing budget planning methods:
- Normative. This is the most frequently used method in our country. It determines budgetary expenses within the limits of future income.
- Index. The basis of this method is an analysis of changes in the inflation level, levels of real incomes and wages. The indices obtained by comparing the data help to apply them for calculating disparate indicators.
- Program Target. This method is used to provide resources for targeted state programs.
- Balance. Using this method, a balance of budget expenditures and revenues is compiled. They are distributed among receivers of funds at all levels over future periods. The forecast of balance resources, supply and demand at market sites is made by linking the economic need for production resources and planning the sources of their funds, distribution and production of resources, ensures balance in the economy.
- Simulation method. When using this method, the calculation model lays down different conditions for how processes will develop. The simulation method allows you to quickly correct deviations for an incorrect version of the forecast.
- The extrapolation method introduces the development prospects of the past and the current into the planning of future phases.
- The method of economic analysis helps to link economic objects and the laws of their development.
State budget planning
Financial planning is the choice of goals where possible to achieve them with available resources, depending on internal and external conditions and coordination of financial flows. It is expressed in the preparation and supervision of the implementation of plans for the formation of expenditures and revenues that take into account the current financial condition in monetary terms.
Financial planning methods:
- Automation method is the easiest method. It is used when time is short.
- The statistical method assumes that all costs for previous years are added up and are divided by the number of previous periods.
- Zero base method.In this method, all positions must be calculated from the very inception. This method demonstrates the actual needs and links them to the possibilities.
The planning process should occur using the following principles:
- Unity. Financial planning should be systematic. The system means the existence of interrelated elements and the presence of a single vector of their development, aimed at common goals.
- Flexibility and multivariate. It is the ability to change its direction in connection with the emergence of new circumstances.
- Continuity. Developed plans are required to constantly replace one another.
- Participation. The planning process is required to involve everyone affected.
Types of financial planning:
- Strategic. It occurs in the absence of concreteness and incompleteness of information. Strategic financial planning processes are difficult to analyze. Years of experience proved the low effectiveness of tough strategic plans. Strategy development reduces uncertainty in tactical planning. Strategic planning is divided into long-term (from ten to fifteen years), medium-term (about five years), short-term (from two to three years).
- Long term.
- Short term.
- Current or operational.
Budget planning is a set of actions at all stages of the budget building process to determine volume indicators and their creation methods. As well as determining the direction of the use of state budgetary resources to ensure stable social and economic social development. The state applies budget planning to ensure the efficient operation of its budget system. It has a number of features:
- The object of state budget planning is the resources of the country's budget.
- The planning entities are considered to be the authorities at the federal, regional and local levels.
- In the process of budget planning, the required economic proportions should be ensured, according to the forecasts of the economic and social development of the country.
- Relations arising at the time of the distribution of GDP and associated with the formation and use of public resources at all stages of the reproduction processes are the subject of budgeting.
- With the help of budget planning, the necessary financial base is formed, standards and specific mechanisms for the implementation of social protection programs for the population are determined.
- Budgeting is based on a financial assessment of the budget, which allows to determine effective options for cash support of projected indicators of social and economic development of the country.
- Budgeting is an effective instrument of a country's budget policy.
The effective use of budgeting in society depends on the quality of achieving the goals and the fulfillment of the tasks facing it at all stages of the budgeting process. Chief among them are:
- the creation of the most important proportions of development in the economic sphere for the planning period;
- determination of ways of budget provision of the predicted level of social and economic development on the basis of competent use of the resources available in the state;
- the identification of hidden reserves in all sectors of the economy and their operational redistribution to the implementation of the state development plan;
- the establishment of literate forms of mobilization of financial revenues by source and the formation of budget revenues, taking into account the hidden reserves of their increase;
- competent allocation of state budget costs between the individual links of the budgeting system and balancing the budgets of the lowest level.
The final result of the budgeting process is a set of decisions and budget indicators in the form of state and general budgets with reference to changes that have occurred or are expected in the budget sphere of the country.
By budget forecasting we mean assumptions based on real calculations about the vectors of budget development, its possible states in the future and other ways, and the time frame for reaching these stages. The forecast is the basis of budget planning and relies on the analysis of the budget for the current period of time and the preceding trend.
Budget forecasting is the compilation of a forecast of budget revenues. This solves the following system of tasks:
- Measurement of the volume of material public resources in general.
- Determination of the size of the acceptable withdrawal of monetary resources to state revenue.
- Finding the most appropriate form of withdrawal of funds in the state treasury.
- The study of all types of impact through the system of fiscal taxation on the development of the production sector.
- Determination of optimal proportions of income distribution among budgets of different levels.
Budget planning in managing a country's economy is of paramount importance.
What is budget planning with e-budget? This is a state-level information system developed by the Ministry of Finance of the Russian Federation. It was created to increase the transparency and openness of the activities of state bodies, and is responsible for financial management. With the help of this budget planning application "E-budget", the quality of management of state bodies is improved through the introduction of innovative technologies and the creation of a single space in financial management.
The system consists of several subsystems:
- HR management.
- Budget procurement planning.
- Financial Management.
- Revenue and Cost Management.
- Manage regulations and information of a reference nature.
- Budget planning.
The program of electronic budget planning must register and conduct activities mandatory listed below users:
- State authorities, regional and local government.
- Extra budgetary funds of the country.
- Companies participating in the budget process, receiving funding from the state budget.
- Legal entities that receive funding from the state budget.
- Citizens recognized as participants in the budget process.
- Procurement organizations under the rules of 223-FZ.
With the help of the state budget planning subsystems located on the official website, you can:
- read the information on filling out the forecast forms;
- write the task of the state level and make budget estimates;
- to maintain accounting and budget accounting for enterprises;
- examine various registries;
- fill in the data and basic documentation on the processes of state order and procurement activities;
- provide interaction in the field of information exchange;
- create, save and send to a special state body documentation on planning and budgeting, execution of point measures.
Now you know what budget planning is.