Budgeting as a

Management
Tool
Adilah Permananingrum, S.E., M.Sc.
 A budget or business budget is one form of various plans that may
be drawn up, although not every plan can be referred to as a
budget.

Budgeting as a
Management Business budget or company budget is a plan for the company's
activities. The plan includes various operational activities that are
Tool (Business interrelated and influence each other.

Administration)
In order to be able to gain profits by doing efficiency as a
measuring tool, and this can use the company's budget as a
function of planning and controlling company programs. Where to
carry out the company's operational functions in the form of
marketing, production, finance, and administration.
 The budget can be considered as a system that has its own
specificity or as a sub-system that requires a relationship (inter-
face) with other sub-systems within the company.

Budget as a The budget can be considered as an autonomous system, because

System it has its own goals and ways of working which are one unit and
which are different from the goals and workings of other systems
in the company, so that it can be considered as a sub-system,
Approach which is part of another system. the greater one.

The system is a collection of components that interact with each

other or depend on each other, which are coordinated in such a
way that they form a unity, and are organized to achieve certain
goals.
Budget Scheme as a System
1. CORE SYSTEM

PLANNING AND MONITORING à PROFIT

MARKETING PRODUCTION FINANCE ADMINISTRATION

2. SUPPORTING SUB-SYSTEM
INTERNAL DATA &
ORGANIZATION STANDARD
ADMINISTRATION STATISTICS ANALYSIS
STRUCTURE NUMBERS
ANALYS OF ACCOUNTING

3. ENVIRONMENT SUB-SYSTEM

DATA & ANALISYS DATA & ANALISYS DATA & ANALISYS PRICE STRUCTURE
ECONOMY INDUSTRY PRODUCT & COMPETITION
 The core of the system: reflects the target, namely profit, which is
the object of budgeting. The core of this system has a function as
well as a management tool to plan and monitor profit-making
activities, so that it only serves the needs of internal management,
and not for parties outside the company.

Supporting sub-systems: reflect various things as sub-systems

whose function is to help smooth the core system. Knowing
everything that is happening quickly and accurately will help in
budget control. The availability of data and information is a
Explanation requirement that supports the utilization of the budget as a
system.

Environmental sub-system: this sub-system is outside the

company, because it cannot be controlled. So the company needs
to make a prediction and make the necessary adjustments to the
changes that occur.
 The Business Budget is a formal and
systematic approach to implementing
responsibilities in planning, coordinating, and
controlling management.
The Business Budget is a formal and
Budget and systematic approach to implementation and
responsibilities in planning, coordinating and
Budgeting monitoring management.
The term corporate budget is often referred
to as: business budget, planning and control
profile, comprehensive budgeting, managerial
budgeting, business budgeting and control.
 Formal in nature, meaning that it is prepared
intentionally and seriously in written form.

It is systematic, meaning that it is arranged

The essence sequentially and based on a logic.
of a business
budget Is a result of decision making based on certain
assumptions.

The decisions taken are the implementation

of functions in terms of planning,
coordination, and supervision.
 Realistic, meaning not too
optimistic and not too pessimistic.
Company
Budget
Flexible, meaning not too rigid,
Preparation has the opportunity to be adapted
Terms to changing circumstances.
Continuous, meaning that it
requires continuous attention,
and is not an incidental effort.
 Planning: companies should always look for potential sources of
produce and plan how to realize them.

Organizing: managers must develop an appropriate organizational

structure, in accordance with the desired goals and appoint the
Budget and right people to fill each position by holding a division of labor.

Manager's Staffing: managers should appoint the right people, who are
qualified by providing motivation in the form of appropriate
Functions incentives.

Directing: managers must demonstrate strong and dynamic

leadership in a firm and open manner.

Control: Managers must always carry out dynamic supervision and

always seek feedback from subordinates.
 Planning function: during the
preparation of work programs.
The Role of
the Budget as
a System for Coordination function: during
Managers program implementation.

Supervision function: at the

time of reassessment.
 Fixed budget, which is a budget that is
prepared for a certain period of time
where the volume is certain and based on
Fixed Budget that volume is planned such as revenue,
and cost, and expenses. There is no periodic
Continuous revision of this budget.
Budget Budgeting in this way is rarely carried out
by companies. This method will be used if
the basic assumptions used have not
changed at all. Whereas in reality, the
basic assumptions must change, because it
is adjusted to what actually happened.
Fixed Budget • Continuous budget, which is the preparation for a certain
period of time, a certain volume, and to find out whether
and the basic assumptions can still be used or not, so that a
periodic reassessment is carried out.
Continuous • The use of continuous budgeting requires the following:
Budget • Requires continuous recording of extreme data. This is
necessary to detect changes in the environment.
• Requires an accounting system and personnel that can
quickly record, analyze and report any deviations in
realization.
 • Comprehensive in budgeting can be interpreted;
• Broader use of budgeting concepts in every company
activity
• The use of the total system approach in the
Comprehensive implementation of daily activities

Budget • General guidelines in the preparation of a comprehensive

budget;
• Carry out specifications against company-wide goals
• Prepare overall preliminary plans
• Develop long term and short term plans
 • Comprehensive Budget, namely the preparation of a
budget with a comprehensive scope (comprehensive),
Comprehensive which includes all company activities such as marketing,
production, finance, human resources, administration and
Budget and others.
Partial Budget • Partial budgeting, namely the preparation of a budget with
a limited scope, there are various reasons for using this
type of budget, for example, it does not have the technical
and financing capabilities, or is limited to only financial
planning.
 Budget in
Time • Reaching the past,
• Concerning the present, and
Dimension • Embrace the future.
 Factors
Influencing • Product

Manager's • Market
• Distribution policy
Wisdom in • Production plan
Planning • Research and development plan
• Organization
• Financial
 • Type and quality of data that can be provided
• Financial accounting system and cost accounting used
(extra or intra komtabel)
Budgeting • Management's attitude in responding to changes in costs
and prices.
Requirements • The level of authority given by the leader to his
subordinates (centralized or decentralized) to change the
budget.
 Benefits of
Budget as a
Planning and • Budget as an estimator.
Monitoring • Budget as a ceiling and at the same time a tool for
regulating authorization.
Tool • Budget as a measure of efficiency.
Organizational • Reflect:
Structure and • Division of marketing, production, finance, and
administrative tasks into various positions established
Cost by the company.
• The division of authority and responsibility of each
Budgeting official according to the hierarchy.
• Command and coordination relationships between
various positions/positions in the organization.
 Cost
• Cost budgeting shows us the process of how to determine
Budgeting and who should be responsible for certain types of costs.

Cost • Cost budgeting is more focused on the person in charge of

issuing a cost.
Utilization • Cost utilization is an accounting process to charge costs
from a cost place to the final product or from a cost place
to another cost place that has utilized the services
produced by the first cost place.
 • Raw material cost
• Cost of auxiliary materials
• Labor costs
• Fuel cost
Cost Grouping • Employee welfare costs
• Maintenance cost
• Cost of depreciation (depreciation)
• Miscellaneous expense
 • Based on the general goals and specific goals of the
company to be achieved
• General purposes such as financial economy, consumers,
Budgeting owners of capital

Mechanism • Specific goals such as product, area of marketing to be

achieved, market share to be owned, ROI.
• The mechanism for preparing the budget is parallel to the
division of operational authority and responsibility as
reflected in the company's organizational chart.
 • Planning Sector ;
Budget • Base activities on study inquiries and studies.

Function for • Mobilize all personnel within the company to

determine the most profitable direction/activity
Companies • To assist or support company policies
• Define company goals
• Help stabilize available job opportunities.
• Resulting in more effective use of physical tools.
 • Coordination Sector;
Budget • Help coordinate human factors with the company

Function for • Connecting company activities with trends in the

business world
Companies • Placing the use of capital in profitable channels,
balanced with company programs.
• To find out the weaknesses in the organization.
 Budget • Supervision field;
Function for • To monitor activities and expenses.
• For the general prevention of waste, this is the most
Companies common goal of budgeting.
 • Since the budget is based on estimates, the successful
implementation of activities depends on the opportunity
for these estimates.
• The budget is only a plan, and the plan is only successful if
Budget it is implemented seriously.
• The budget is only a tool used to assist managers in
Weaknesses carrying out their duties, not replace them.
• Conditions that occur are not always one hundred percent
the same as previously predicted, therefore the budget
needs to be flexible/flexible.