1. Analysis of Stress and Difficulty

Overall budget management is an effective approach to achieve the strategic objectives and proper resources allocation of an enterprise. It is a kind of business operation system which contains the functions of control, motivation, evaluation, etc. and intends to comprehensively and thoroughly implementing the strategic policies of the enterprise.

However, most enterprise cannot achieve their objectives by implementing budget management due to the inaccurate budget compilation and ineffective control, which results in unreduced cost and increased labor and expense. The budget, which is compiled by laborious and time-consuming work, is completely incapable to be combined with the business and management practice of the enterprise. The budget functions like a “statement” and this kind of budgeting is meaningless.

The first question to be answered is how to efficiently manage the overall budget. And we need to analyze the stress and difficulty for an enterprise in implementing overall budget management.

1. The basis is the establishment of budget management principle and the budget system model.

In implementing budget management, most enterprises compile and manage budget by use of EXCEL. As a personal office tool, Excel is relatively flexible in compiling budget. However, for an enterprise of a certain scale, it will make the budgeting rather complicated due to the inconformity of budgeting forms, which makes it impossible to establish a complete set of budget system. However, it is true that the key to proper budget management is to define a complete and integrative set of budget system.

2. Because the compilation and summarization of budget is a rather laborious work, stress shall be put on improving the efficiency of budgeting.

Due to the comparatively large scale of the group of enterprises, there is a large quantity of budget data to be processed and a great demand for analysis and there is an increasing labor demand in budgeting procedures such as preparation, summarization and analysis of data. If we manually use EXCEL to budget, we must configure a large amount of formulas and configure and define tables, which means laborious and time-consuming budgeting work and it is hard to realize the summarization of all budgets all over the group and to easily manage the budget of each member unit on the basis of the organizational structure of the group. These kinds of valueless labor waste too much energy of the budget staff, which causes them unable to spend time on valuable and meaningful budget analysis and support for decision-making. And sometimes because of the large devotion to the work, the budgeting is given up halfway.

3. How to make the budget as accurate as possible?

Sales budget is the start point of the overall budget. If the enterprise can not make an accurate sales prediction, it will lead to inaccurate budget, which makes the budget fail to become the standard and goal of daily production and business practices of the enterprise. As a result, the enterprise will lose confidence in compiling and implementing budget, much less the budget management.

4. Because many departments and many working procedures are involved, it is difficult to effectively and efficiently coordinate and management the involvement of the entire organization.

It is necessary to improve the control and management on authorization for a better implementation of budget management. If there is no support of platform software, it will be difficult for a group to efficiently manage and control the budget pattern of its subordinate units and to implement management on the budgeting process of each department, and be impossible for the entire group to implement budget management on the same platform, which may lead to long period of budget and low efficiency of budget management.

5. It is difficult to achieve concurrent monitoring, timely early-warning and is unable to timely adjust and make variance analysis, analyze the causes of the variance and timely provide supports for decision-making.

If there is no support from budget software, it will be impossible to effectively connect with the financial system and ERP system, difficult to achieve concurrent monitoring and unable to achieve timely early-warning and automatically acquire actual data for the analysis purpose.

6. It is vital to use budget in appraisal and evaluation.

Budget is the basis for performance appraisal and the scientific budget objective values can be regarded as the standard indexes for the performance appraisal of each company and department. While the budget management provides reference value for performance appraisal, the managers can constantly revise and optimize the system of performance appraisal according to the practical results of the budget for the purposes of ensuring the correctness of appraisal and truly playing its role in evaluation and motivation.

2. Solution Overview

To achieve an efficient budget management, it is necessary for the enterprise to establish proper budget management principle and working procedures.

1) Working contents and procedures of overall budget management

The essence of budget management is to properly deal with the centralization and decentralization of financial capital between group companies and its functions or the subsidiaries and the interrelation between centralization and decentralization of financial management power. Because the budget compilation can have an effect on the strategic development of the entire group, it is necessary to integrate leadership, change into leveled management, and establish corresponding management organization. Under the integrative leadership of this organization, it is possible for the enterprise to set the budget objective system according to the strategic objectives and determine and distribute the suitable budget system model and compilation principle to the inferior units. Each executive organization of the inferior units will compile and submit the budget according to the superior requirements and their actual situation, examine and approve the budget according to the relevant regulations, analyze and appraise the budget.

2) Overall Budget Management Flow

Figure 2: General Architecture of Overall Budget Management

The overall budget management means regarding the economic running of the enterprise as a whole and performing the compilation, examination, approval and summarization of budget under the guidance of the objective profits of the enterprise. In budget compilation, it is possible to use predicting model for the purpose of improving the accuracy of budgeting. Then implement control over it, perform variance analysis of budget performance, analyze the causes of variance and adjust the allocation of resources. At the end of each budget cycle, it is necessary to appraise the budget compilation and budget performance, regard them as the basis for business operation evaluation of the enterprise, combine them with the performance appraisal of the enterprise and use it to guide the budget compilation of next cycle.

3) Overall Budget Flow Approval

The examination and approval of overall budget management is divided into two categories: one is the superior unit’s approval of the budget data submitted by the inferior units; the other is the flow approval of intra-enterprise applications for budget and its implementation. The application of budget is formed by the enterprise according to its business operation plan and expenditure plan. Then the application will be examined according to the defined approval procedures. If it is approved, it will become the budget data of this enterprise. When the enterprise is carrying out its businesses, it shall first submit an application before it is examined according to the defined approval procedures. If it is approved, it will be allowed to be practiced and become the budget performance data at the same time. In the process of budget implementation, the budget can be adjusted and added to meet the requirements of objective causes. The processing flow is illustrated as the following figure.

Figure 3: Budget Flow Management

4) Budget Implementation Control

The approved budget data is allowed to be implemented. Inspur overall budget management system provides a control interface to achieve the connection between business system and budget system. Controlling methods can be defined in the budget system, which can perform current control as well as cumulative control in either rigid or soft way. When the business system is processing the business, it will perform real-time check and control on budget according to the early-warning conditions defined in the budget setting and give hints on occurrence of business, which achieves the concurrent control over budget and automatic integrate the performance data into the budget system as the foundation for budget analysis.

Figure 4: Real-time Control over Budget Performance

5) Budget Variance Analysis

During the process of budget implementation, it is possible to timely inquire and analyze the budget performance in terms of the organizational structure of the unit, product and project, budget cycle and budget version. It is also possible to make contrast analysis between the budget data and performance data of the budget item, analyze the variance and analyze the causes of the variance through different levels. By use of the analysis methods such as index analysis, contrast analysis, cycle contrast analysis, set-based analysis, etc. it can support then enterprise in decision-making. It also enables the graphic illustration of the analysis report.

It can also appraise and evaluate the budget performance on a regular basis according to the relevant KPI appraisal indexes.

6) Budget Adjustment

In the process of budget implementation, the later budget data can be adjusted and added according to the changes in market and policy or the results of variance analysis for the purpose of bettering the allocation of company resources and achieving the goals of the enterprise. In this way, it is possible to make relevant budget adjustment and the adjustment process of those budget items that is adjusted several times can be recorded according to the version number of each adjustment. The budget adjustment shall also be fulfilled according to specific procedures as the following figure shows:

7) Budget Appraisal

The overall budget management is the elaboration, decomposition and quantification of the enterprise strategic objectives and the implementation plan of enterprise strategy as the above figure shows. The accuracy of budget compilation and the achievement of budget performance shall both be appraised and analyzed. And the appraisal results shall be closely related to the compensation of the managers and staff of the enterprise, which may serve as a basis for rewards and penalties and further motivate the employees to make a joint effort in achieving the enterprise strategic objectives. The budget appraisal is also the last step in each budget cycle. The appraisal results can be used to detect problems, gather experience and guide the budget compilation of next budget cycle, which may form a circular and progressive management pattern.

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