Budgeting
Its purposes
1. Planning
2. Control
3. Coordination
4. Targets
5. Motivation {Through what we can achieve the motivation.}
 Formation
 Use and monitoring
6. Evaluation
7. Authorization.
Types of Budget:
There are many types.
1. Periodic budget
Show cost and revenue for 1 period of time.
2. Rolling budget
Continuously updating by adding a further accounting period (month and
quarter) when the earliest accounting period has expired.
3. Fixed budget
4. Flexible budget
5. Participating budget (Bottom up)
6. Activity Based budget
7. Zero Based budget
8. Imposed budget (top down)
Other Relevant Definition:
1. Feedback Control
2. Feedforward Control
Feedforward control is a mechanism in a system for preventing problems
before they occur by monitoring performance inputs and reacting to maintain
an identified level.
3. Decentralization
A decentralized organizational structure is one in which senior management
has shifted the authority for some types of decision making to lower levels in
the organization
4. Benchmarking
It is a standard setting.
Benchmarking is the process of comparing your own organization, its
operations or processes against other organizations in your industry or
in the broader marketplace. Benchmarking can be applied against any
product, process, function or approach in business. Common focal
points for benchmarking initiatives include measures of time, quality,
cost and effectiveness, and customer satisfaction.
The intent of benchmarking is to compare your own operations to that
of competitors and to generate ideas for improving processes,
approaches, and technologies to reduce costs, increase profits and
strengthen customer loyalty and satisfaction. Benchmarking is an
important component of continuous improvement and
quality initiatives, including Six Sigma.
The case for benchmarking suggests that a particular process in your
firm can be strengthened. Some organizations benchmark as a means
to improve discrete areas of their business and monitor competitors'
shifting strategies and approaches. Regardless of the motivation,
cultivating an external view of your industry and competitors is a
valuable part of effective management practices in a world that is
constantly changing.
There are a number of core drivers of benchmarking initiatives in a
firm:

The most common driver for benchmarking comes from the
internal perspective that a process or approach can be improved.
Organizations will collect data on their own performance at
different points in time and under different circumstances, and
identify gaps or areas for strengthening.
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Many organizations compare themselves to competitors in an
attempt to identify and eliminate gaps in service or product
delivery or to gain a competitive edge. The data gathered in a
competitive benchmarking initiative offers specific insights into
a competitor's processes and thinking.
The term "strategic benchmarking" is used to describe when a
firm is interested in comparing its performance to the best-inclass or what is deemed as world-class performance. This
process often involves looking beyond the firm's core industry
to firms that are known for their success with a particular
function or process.
Difference of Benchmarking and Reverse
Engineering:
Benchmarking involves the usage of information gathered from
world class companies in order to improve your company's
performance. Reverse engineering is the study of an actual
product by disassembling it to determine how it was created.
TYPES OF BENCHMARKING:
 Internal benchmarking.
 Competitive benchmarking.
 Functional benchmarking.
 Strategic benchmarking.
5. Balance Scorecard.
Financial Matters Iss mai har chez par is tahan faisla karna hai ka
shareholders ko faida ho.
 Cashflow and gearing
 Sales growth
 Increase in market share.
Learning and Growth Hum is mai is tarhan dekhta hai ka hum kis
tarhan improve kar sakta hai----- Abilities, skills wagera ko.
 Employees satisfaction/ retention/ productivity
Customers
Obviously, customer ko faida dena hai
Internal business process
What business process must we excel.
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Efficiency
Unit cost
New product
Manufacturing process
Cycle time
6. Non-Financial performance indicator
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Competiveness
Activity level
Quality of services [new accounts gain and loss, rejections in
manufacturing, repeat customers order]
Productivity
Customer satisfaction
Quality of staff experience [Staff turnover rate, days absence, job
satisfaction, training programs]
 Innovation.
7. Beyond budgeting.
Beyond Budgeting is the idea of abolishing traditional budgeting processes to
eventually improve management control over an organization. By abandoning
traditional budgeting processes, a company aims to establish a highly
decentralized organizational system and adaptive set of management
processes
Pros
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Faster response
Innovative strategies
Lower costs
More loyal customers
Cons
Major shift in how a company is managed.
Time Required.
Gaming the System.
Blame for Outcomes.
Expense Allocations.
Spend It or Lose It.
Only Considers Financial Outcomes.
Strategic Rigidity.
Related Courses.
8. Financial performance indicator
 Profitability
 Liquidity
 Asset turnover ratios
9. Performance evaluation in service industry