Planning Techniques- Budget & Analysis

The process of determining the specific objectives and means by which strategic plans will be achieved. Tactical plans are ST and cover periods up to 18 mths.

Tactical plans are also single-use plans bc they are developed to apply to specific circumstances during a specific time frame.

Only applies to this year

A (type of) single-use tactical plan. Placing responsibility for achievement of strategic goals in the hands of managers promotes routine accomplishment of strategy as part of the manager's job function.

To effectively budget, an org should implement formal budget policies that include the following key features.
1. Mgmt participation
2. Budget guidelines

A budget will extend for a period of one year & involve numerous individuals. The budget process normally involves a budget committee, which includes members of sr. mgmt.
*the budget committee is charged with resolving disputes and making final decisions regarding major budget changes. (btw lower level mgrs & higher level mgrs)

Top mgmt should provide guidelines for budget preparation based on the entity's strategic goals & LT plan.
1. Evaluation of current conditions
a. consideration of the changes to the environment since (the last budget) the adoption of the strategic plan.
b. org goals for the coming period that may have changed from PY
c. operating results year to date

A. setting the tone for the budget (cost containment, innovation (R&D increase)
b. Corporate policies (mandated downsizing)

Standards have been referred to as per unit budgets and are integral to the development of flexible budgets.

*Standards are often set below expectations to motivate productivity and efficiency. SB revised periodically (once a year)

Represent the costs that result from perfect efficiency and effectiveness in job performance.
* Generally not historical, they are foward looking. No provision is made for normal spoilage or downtime.

A. Advantage of using ideal standards is the impled emphasis on continuous quality improvement (CQI) to meet the ideal.
b. Disadvantages include demotivation of employees by the use of unattainable standards and the inability to use standards in standard cost of goods sold.

GR: use w/ flexible budgets
Represent costs that result from work performed by employees with appropriate training and experience but without extraordinary effor. Provisions are made for normal spoilable and downtime.
a. advantage - fosters the perception that standards are reasonable.
b. disadvantages - required use of judgment and potential manipulaiton.

The best standard is the standard that leads to the accomplishment of strategic goals. (motivate your staff)

Are set exclusively by mgmt.
a. advantages -can be implemented quickly & will likely include all costs
b. disadvantage - workers might not accpet imposed standards

Set by both mgrs and the individuals who are held accountable to those standards.
a. advantage - workers are more likely to accept participative standards.
b. disadvantage - slower to implement (bc everyone is involved, slows down the process)

"Annual business plan"
*Documents specific ST operationg performance goals for a period, normally one year or less.
*The plan normally includes an operating (nonfinancial) budget as well as a financial budget that outlines the sources of funds & detailed plans for the expenditure.

Prepared to provide comprehensive & coordinated budget guidance.
a. serves to communicate the criteria for performance over the period covered
b. master budgets referred to as static budget (one level of activity)
c. appropriate for most industries but are particulary useful in mfg settings.