FEW BUSINESS PLAN TO FAIL , BUT OF THOSE FLOP, FAILED TO PLAN BUDGETS Monika Kansal, University Business School, PURC, Ludhiana

A budget is The quantitative expression of a; proposed plan of action by the management. Next year I shall be increasing sales substantially Next year I shall be increasing sales by 34%. Monika Kansal, University Business School, PURC, Ludhiana

The quantitative expression of a; proposed plan of action by the management.

Next year I shall be increasing sales substantially

Next year I shall be increasing sales by 34%.

For a specified period of time In 2007 we shall be preparing the budgets for 2008. in 2008 we shall be preparing the budgets for 2009. And so on_______________ Monika Kansal, University Business School, PURC, Ludhiana

In 2007 we shall be preparing the budgets for 2008.

in 2008 we shall be preparing the budgets for 2009.

And so on_______________

Short term budgets may be monthly or quarterly or biannually. Monika Kansal, University Business School, PURC, Ludhiana

Short term budgets may be

monthly or quarterly or

biannually.

Helps in coordinating what needs to be done Uncertain future Monika Kansal, University Business School, PURC, Ludhiana

Covers Both financial and non financial aspects Monika Kansal, University Business School, PURC, Ludhiana

Both financial and non financial aspects

Financial statements regarding the future Monika Kansal, University Business School, PURC, Ludhiana

Alternative terminology Performa statements Targeting Profit planning Monika Kansal, University Business School, PURC, Ludhiana

Performa statements

Targeting

Profit planning

Types of budgets From flexibility point of view Static/ fixed Flexible Monika Kansal, University Business School, PURC, Ludhiana

From flexibility point of view

Static/ fixed

Flexible

Flexible Conjures more realistic picture of actual variances Monika Kansal, University Business School, PURC, Ludhiana

Conjures more realistic picture of actual variances

In flexible budget emphasis is on Segregation of all costs in fixed, variable and semi-variable categories Monika Kansal, University Business School, PURC, Ludhiana

Segregation of all costs in fixed, variable and semi-variable categories

A hurried tour through cost behavior Materials @ 3 per unit Labour @ 2 per unit Expenses - Fixed Rs. 100,00,000 Semi-variable Rs 4 per unit (calculated for 5000 units of which 60 % is fixed) Monika Kansal, University Business School, PURC, Ludhiana

Materials @ 3 per unit

Labour @ 2 per unit

Expenses - Fixed Rs. 100,00,000

Semi-variable Rs 4 per unit (calculated for 5000 units of which 60 % is fixed)

MATERIALS ARE VARIABLE COSTS. Monika Kansal, University Business School, PURC, Ludhiana

SILK WORMS Monika Kansal, University Business School, PURC, Ludhiana

Indirect materials Indirect labour Indirect expenses FIXED VARIABLE OVERHEADS SEMI – VARIABLE Monika Kansal, University Business School, PURC, Ludhiana

Is a budget same as estimate Simply guessing the future event under anticipated conditions With use of heuristics or scientific methods Monika Kansal, University Business School, PURC, Ludhiana

Simply guessing the future event under anticipated conditions

With use of heuristics or scientific methods

Is budget a forecast Assessment of probable future events TATA SMALL CAR Monika Kansal, University Business School, PURC, Ludhiana

Assessment of probable future events

Budget is the implication of the forecast Budgets starts where forecasting ends Monika Kansal, University Business School, PURC, Ludhiana

Budgets starts where forecasting ends

Budget is a part of budgetary control PLANNING CONTROLLING COORDINATING Monika Kansal, University Business School, PURC, Ludhiana BUDGETARY CONTROL BUDGETS

Meaning of budgetary control Establishment of budgets Continuous comparisons Remedial action Revision of standards ,if necessary ACTUAL BUDGETED Monika Kansal, University Business School, PURC, Ludhiana

Establishment of budgets

Continuous comparisons

Remedial action

Revision of standards ,if necessary

Budget Manual A document, schedule, booklet which inter alia, responsibilities of persons engaged in the routine of and of forms and records required for budgetary control. CIMA, London Monika Kansal, University Business School, PURC, Ludhiana

A document, schedule, booklet which inter alia, responsibilities of persons engaged in the routine of and of forms and records required for budgetary control.

CIMA, London

Budget period SHORT TERM LONG TERM ANNUAL Monika Kansal, University Business School, PURC, Ludhiana

Strategies and Budgets STRATEGIES SHORT TERM PLANNING LONG TERM PLANING SHORT TERM BUDGETS LONG TERM BUDGETS Monika Kansal, University Business School, PURC, Ludhiana

Master budget The summary budget incorporating its functional budgets and is finally approved, adopted, employed. Monika Kansal, University Business School, PURC, Ludhiana

The summary budget incorporating its functional budgets and is finally approved, adopted, employed.

A case study- a million more cars Demand forecast for 2010 – 2.2 to 2.3 million cars society of Indian Automobiles Manufacturers Source- BW,29 jan 2007 Monika Kansal, University Business School, PURC, Ludhiana

Demand forecast for 2010 –

2.2 to 2.3 million cars

society of Indian Automobiles Manufacturers

Source- BW,29 jan 2007

Retail sector opens up- Income of agricualture dependent people shall increase leading to increase in demand for automobiles The global automibile market moving towards small cars, fresh demands from even developed markets Monika Kansal, University Business School, PURC, Ludhiana

Retail sector opens up- Income of agricualture dependent people shall increase leading to increase in demand for automobiles

The global automibile market moving towards small cars, fresh demands from even developed markets

Long term strategies big –bang announcements Tata motors rs. 10,000 crores investments by 2009-2010 Tata and Fiat rs.4000 crores plant M& M and Renault half a million cars capacity plant Hyundai mulls doubling the capacity from 3,00,000 to 600,000 cars Monika Kansal, University Business School, PURC, Ludhiana

Tata motors rs. 10,000 crores investments by 2009-2010

Tata and Fiat rs.4000 crores plant

M& M and Renault half a million cars capacity plant

Hyundai mulls doubling the capacity from 3,00,000 to 600,000 cars