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DISTRIBUTION Budgeting & Control SYSTEM

Presented by

Praveen Harjal 20

DISTRIBUTION Budgeting & Control SYSTEM


DISTRIBUTION :THE movement of goods and services from the

source through a distribution channel, right up to the final customer, consumer, or user, and the movement of payment in the opposite direction, right up to the original producer or supplier. BUDGETING: A budget is a plan for your future income and expenditures that you can use as a guideline for spending and saving. Budget Control System : The functions in this Funds Management component support budget planning, budget execution and allow you to monitor the availability of funds. The Budget Control System (BCS) in Funds Management is an alternative to former budgeting. BCS is designed to allow flexible customer-specific adjustments to all important functions.

Distribution Objectives
Minimize total distribution costs for a given service

output
Determine the target segments and the best channels

for each segment


Objectives may vary with product characteristics

Basic Channels of Distribution


Manufacturers/products

Agents/brokers Wholesalers/distributors

Retailers

Retailers

Consumers and organizational end users


4

BUDGET
A budget is a programme designed for a stipulated

time frame that highlights the selling expenses and anticipated sales, quantitatively and in value terms. This helps in making an objective estimate of net profit on the selling operations. In a real sense, it is a statement aimed at comparing the revenue, net profits, sales volume and the selling expenses relating to a particular product or the entire business.

Budget Purposes
Budgets are formulated for many reasons, including the major ones of planning, coordination, and control.
1. 2. 3.

Planning: Corporations and their functional units develop objectives for future periods, and budgets determine how these objectives will be met. Coordination: The budget is a major management tool for coordinating the activities of all functional areas and subgroup within the entire organization. Control: Allocation of budgeted funds gives management control over their use. Sales managers estimate their budget needs, are given funds to operate their units, and then are held responsible for reaching their stated goats by using their budgets effectively. As the sales program is implemented and income and expenses are actually generated, managers assess results against the amount budgeted and determine whether they are meeting objectives.

Factors to be considered while preparing budget


The sales manager should take into consideration the following

factors while preparing the sales budget. 1. Past sales figures and trend 2. Salesmen's estimates 3. Plant capacity 4. General trade prospects 5. Orders on hand 6. Proposed expansion or discontinuance of products 7. Seasonal fluctuations 8. Potential market 9. Availability of material and supply 10. Financial aspect

Budget Analysis
Budgeting Analysis cover the following application areas:
1. 2. 3. 4. 5. 6.

Sales Analysis Sales Orders Finance Accounts Receivable Finance Accounts Payable Finance General Ledger Inventory

7.
8.

Purchasing
Manufacturing

Budgetary Control
Budgetary control has become an essential tool of management

for controlling costs and maximising profits. The technique of budgetary control is, in fact, a must for every business enterprise. To exert control over the budgets, every organisation has to set up an effective budgetary control system. The following factors should be examined at the time of budgetary control reporting:
What changes are most likely in the business environment? What are the major objectives to be achieved?

Ratio Analysis
Ratio analysis is a powerful tool of marketing control. It helps in correctly identifying the financial strengths and weaknesses of a company. Different ratios can be calculated for different purposes. For example, profitability ratios help determine the profitability of a company.
Following ratios are useful for management control:

i. Current ratio
iii.Proprietary ratio v. NP ratio vii.Earnings per share ix. Dividend per share xi. Average collection period

ii. iv. vi. viii. x. xii.

Liquidity ratio GP ratio Operating profit ratio Dividend payout ratio Debtors turnover ratio Working capital turnover ratio

CONCLUSION
preparation and implementation of budgets alone

will not achieve much unless a comparison is made regularly between the actual performance and the budgeted performance. To ensure the success of budgetary control system, proper follow up action has to be taken immediately for the reports submitted.

THANK YOU