Performance based budgeting

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Performance based budgeting

  1. 1. Performance based budgetingIn performance budgeting, we stress on performance measures of each unit and worker in theorganisation.We set targets based on achievable performance and cascade them to the lowest unit in theorganisation.Here are the major steps in performance budgeting:- 1. Start with the business expected return on equity based on industry and past performance. o relate cost volume profit analysis and o Operational or Production strategies 2. Establish the Critical success factors to achieve the above goals. 3. Establish and link strategies into a strategic map o trading strategies - Working capital 4. Establish fundamental structures using ROE Du Pont Chart. o Fixed Asset Strategies 5. Discuss and cascade performance metrics to the lowest staff. o HR Strategies 6. Start budgeting with sales, Purchasing, Production, HR etc and end with cash balance using the KPIs, KRAs and targets. o Financial Strategies and sources of fundsThis budget incorporates goals, targets, strategies and measures. The HR department couldstill apply the same measures for its performance appraisals.by Hj Arriffin Mansor 012-2786282

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