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28ЗМ1ШАНЕ БЮДЖЕТУВАННЯ ЯК 1НСТРУМЕНТ УПРАВЛ1ННЯ СТАЛИМ РОЗВИТКОМ
ПРОМИСЛОВИХ ШДПРИСМСТВ
Подрез O.I.
астрант кафедри менеджменту iнновацiйного тдприемництва та мiжнародних економiчних вiдносин Нацюнального технЫного утверситету «Хартвський полiтехнiчний тститут»
MIXED BUDGETING AS A TOOL FOR MANAGING SUSTAINABLE INDUSTRIAL ENTERPRISE
MANAGEMENT
Podrez O.
PhD student in the Department of Management innovative entrepreneurship and international economic relations National Technical University Kharkiv Polytechnic Institute
Анотащя
Для досягнення сталого розвитку промисловим щдприемствам необхвдш шструменти управлшня, ключове м1сце серед яких займае шструмент управлшня витратами. Основним методом, за яким викорис-товуеться шструмент управлшня витратами, е бюджетування. Бюджетування не дозволяе кер1вництву приймати оперативш ршення щодо управлшня змшними витратами щодо закуп1вл1 сировини та корегу-вання технологи виробництва. Виршення проблеми полягае у використанш безбюджетного управл1ння змшними витратами. Тому, метою дослвдження е поеднання двох метод1в управлшня витратами (бюджетування та безбюджетне управл1ння) та створення нового методу - змшане бюджетування. Для виршення проблеми поставлен завдання: провести анал1з понятшного апарату щодо метод1в управл1ння витратами щдприемств, визначити сутнють поняття «змшане бюджетування» та розробити схеми узгодження управ-лшських ршень щодо планування витрат методом змшаного бюджетування. В результат^ побудовано новий шструмент управл1ння витратами за методом змшаного бюджетування, розроблено процедуру узгодження систем бюджетування, загальну схему взаемозв'язку бюджепв та кошториав промислового щд-приемства. Використання запропонованого шструменту управлшня витратами дозволяе оптим1зувати змшш витрати, знизити соб1варт1сть продукцп та тдвищити прибутковють д1яльност1 промислових щдп-риемств.
Abstract
To achieve sustainable development, industrial enterprises need management tools, the key among which is the cost management tool. The main method by which a cost management tool is used is budgeting. Budgeting does not allow management to make prompt decisions about managing variable costs in purchasing raw materials and adjusting production technology. The solution to the problem is to use budgetary variable cost control. Therefore, the purpose of the study is to combine the two methods of cost management (budgeting and beyond budgeting management) and to create a new method - mixed budgeting. To solve the problem, the tasks were set: to analyze the conceptual apparatus on the methods of enterprise cost management, to determine the essence of the concept of "mixed budgeting" and to develop schemes for the coordination of management decisions on cost planning by the method of mixed budgeting. As a result, a new cost management tool was developed using the mixed budgeting method, a procedure for reconciling budgeting systems was developed, and a general scheme for interrelating the budgets and budgets of an industrial enterprise. The use of the proposed cost management tool allows to optimize variable costs, reduce the cost of production and increase the profitability of industrial enterprises.
Ключов1 слова: сталий розвиток тдприемств, шструменти управлшня, бюджетування, безбюджетне управлшня, змшане бюджетування.
Keywords: sustainable enterprise development, management tools, budgeting, beyond budgeting manage-ment,mixed budgeting.
The topic of sustainable development is very relevant for the life of both Ukraine and all countries of the world. Research by prominent economists shows that enterprises face a number of challenges in creating development management tools.
The activities of industrial enterprises are material, energy and labor intensive, which is directly related to costs. Therefore, one of the main tools of development
management is cost management. Its purpose is to optimize direct variable costs, which affects the cost of production and the efficiency of business entities.
In some industries, to which it is expedient to include coke, foundry and others, there is a need to form process maps for each production cycle, based on available material resources. The budgeting system allows
for sound planning of current expenditures in corporations, but does not carry out operational and production planning of direct costs as per shift or day.
For industrial enterprises that have a large share of "direct material resources" and "direct wages" items in the structure of production costs, effective management of these costs allows them to generate additional income.
Thus, there is an urgent need to improve the cost management tool under the planning method.
Three concepts of cost management are used in the economic literature - "budgeting", "beyond budgeting management" and "zero-based budgeting".
The essence of "budgeting" in scientific works is treated differently. Thus, O. Krainyk [8, p.40] considers that budgeting is "the process of planning the future activity of an enterprise". Stephen C. Hansen, David T. Otley, and Wim A. Van der Stede [7] address two issues with budgeting: the issues of efficiency and lack of planning. I. Andrushchenko and O. Kasian [1] emphasize that budgets are "developed on a yearly basis, including by quarter, month and decade. T. Illiashenko, K. Illiashenko and M. Skobenko [6, p. 43] - as a tool of effective operational management, but this thesis contradicts the statements of O. Krainyk [8].
Almost all authors emphasize that budgeting is a financial planning tool designed to effectively manage the costs of items and responsibility centers. However, it is based on the analysis of deviations compared to the previous period, not the costs themselves [12]. Therefore, this management is not consistent with the operational, which leads to problematic situations in making economic decisions on production.
The essence of zero-based budgeting, according to A. Cherep [14], is to analyze and substantiate costs in full, i.e. from scratch. O. Parieva [12, p.269] stipulates that this method is "high resource-intensive and laborintensive, does not cover intangible results of operations and requires the involvement of additional specialists", so large financial and resource costs are required for its implementation.
The concept of "beyond budgeting management", as defined by Jurgen Daum [4], "opens up new opportunities for strategic enterprise management with the transition to flexible allocation of resources, while simplifying and making the enterprise's operational planning and management process more flexible while reducing costs" [4].
Thus, studies of three approaches to enterprise cost management allow us to establish that scholars view them as separate management tools that have certain advantages and disadvantages. This approach, in our view, is ineffective, because: budgeting does not use operational and production planning, zero-based budgeting does not take into account prior experience of the enterprise on indirect costs, and beyond budgeting causes chaos in the cost management system. Therefore, there is a need to improve the theoretical substantiation of enterprise cost management in order to build a sustainable development management tool. For this purpose it is proposed to introduce a new concept of "mixed budgeting" and to develop a methodology for its application in industrial enterprises.
The purpose of the article is to define the essence of the concept of "mixed budgeting" and to develop a methodological approach for its application by industrial enterprises. To achieve this, the task is to identify the essence of mixed budgeting as a tool for managing sustainable development and to develop a procedure for reconciling budgeting and beyond budgeting cost management for industrial enterprises.
In the process of writing the article, we used the following scientific methods: abstract-logical and dialectical - in order to clarify the essence of the concepts of "budgeting", "zero-based budgeting" and "beyond budgeting management"; observation and comparison, analysis, synthesis and generalization - in order to determine the common features between budgeting, zero-based budgeting and beyond budgeting cost management for enterprise; systematization and formalization - in order to establish a procedure for combining budgeting and beyond budgeting cost management for an enterprise; system approach - in order to justify the new cost management tool - mixed budgeting.
As stated in the paper [4], modern enterprises have problems in managing development, as they simultaneously develop the necessary products (long-term perspective), build good relationships with customers, employees and business partners (medium-term perspective) and operate with profit (short-term perspective). Therefore, "traditional enterprise management tools, such as budgeting and monthly comparison of planned and actual indicators, have proved too rigid and inflexible for these purposes and have already played their role as the only basis underlying the management system" [4].
Zero-based budgeting is, in our opinion, a type of budgeting that differs from traditional budgeting processes by examining all costs for each new period, enabling enterprises to radically revise their cost structures and increase competitiveness. But this process begins with a reassessment of strategic intent, so the focus is on adjusting goals, reducing individual milestones and costs. It criticizes planning "from the attained level" and is an alternative to it, but is not used in operational and production cost planning.
Beyond budgeting cost management, according to M. Mahomedov [9, p.18-21], allows to carry out optimal purchases and use of material resources for the production cycle, as well as to adjust the structure of direct variable costs by elements.
Each of these systems has its advantages and disadvantages. Thus, Hope D., and Fraser R. [13, p.23] identify three shortcomings of the existing budgeting system: 1) budgeting is a laborious and expensive process; 2) budgeting does not meet the requirements of modern competition, the needs of executives and operational managers; 3) the enormous scope of reporting data manipulation.
O. Madar [10, p.167] states that "beyond budgeting management is not applied to coke-chemical enterprises because of organizational factors, low variability of the surrounding environment and peculiarities of distribution of commodity products". At the same time, this author does not take into account the peculiarities of the supply of primary raw materials - coal, namely:
the variety of brands and prices for coal, suppliers and terms of supply. M. Mahomedov [9, p.18-21] proves that beyond budgeting cost management is the most pleasant for operational and production planning.
Thus, the planning method, which is the basis of the cost management tool, needs to be improved by introducing mixed budgeting.
Mixed budgeting is based on a combination of budgeting and beyond budgeting cost management. Such a combination will contribute to the introduction of positive budgeting features (improving the coordination of units, coordination of areas of activity; improving efficiency and effectiveness in management decisions; improving financial results based on profit and cost management at the operational level; improvement of solvency at the expense of effective money flow management [1, p. 44]) and beyond budgeting cost management (reducing actual costs, increasing revenue for coke-chemical enterprises and solving the problem of adaptation of enterprises" to the environment [9, p.21]).
In the works by M. Bilyk [2], T. Illiashenko, K. Illiashenko and M. Skobenko [1, p.36] budgeting is defined as an operational management tool; B. Needles, S. Miles and G. Anderson [11] - as a tool (financial plan) of strategic planning, and I. Ziatkovskii [5, p.248] - as "economic regulator of relations between structural subdivisions of enterprise and enterprise with external environment".
When budgeting short-term (operational) planning is carried out for up to a month, and for industrial enterprises, operational and production planning is calculated as per shift, day, so budgeting does not complete the task of operational and production planning.
Consequently, mixed budgeting allows for intensive intervention in the production process through operational cost management. New management opportunities for industrial enterprises are to create the conditions for budgeting to be shared as strategic, medium-and short-term (up to a month) planning and beyond budgeting management (for a term of a shift to a month).
M.S. Mahomedov [9, p.19] suggested the use of beyond budgeting cost management for coke production, but he did not consider how the process of budgeting and beyond budgeting cost management works.
The author of the article developed a procedure for planning, use and analysis of production by volume, quality and material costs (Fig. 1), which consists of three stages. At the first one, static budgets for the production of products by quality and volume shall be created, as well as the budget for the purchase of materials by type, volume and average (last year) prices. At the second - the actual cost estimate of production for the production cycle and by months of the year shall be created. On the basis of actual production capacity, it calculates the volume of production of products by quality and the volume of purchases of materials by types and prices. At the third stage - they calculate and analyze deviations of the planned budgets and actual estimates of production capacity, material costs and manufacture of products. In addition, an overall assessment of the impact of factors (production capacity, material resources by volume and prices) on product manufacture is made.
Fig. 1. Procedure for reconciling budgeting and beyond budgeting management in terms of production capacity,
manufacture of products and costs of materials Source: composed by the author
In general, the relation between budgeting and beyond budgeting cost management for industrial enterprises shows the effect of mixed budgeting (Fig.2).
Budgeting
Budget of finished goods stock
Production budget
Budget of constant general expenses of production
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Estimate of direct costs of labor payment
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Estimate of variable general expenses of production
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Estimate of needs for materials
Estimate for purchase of materials
Estimate of accounts payable
Sales costs budget
Sales budget
Administrative costs budget
Accounts receivable budget
Estimate of monetary funds
Monetary funds budget
Consolidated budget
Profit statement
Cash flow statement
Marketing budget
Budget balance sheet
Fig. 2. Interrelation of budgets and estimates of an industrial enterprise Source: developed by the author according to the work by S.F. IIolov [3, p. 246/
Beyond budgeting cost management is highlighted with estimates. The concept of "estimates" is usually used in the budgetary financing of non-profit organizations. It is the main planning financial document, which is drawn up after approval of the state and local budgets. In this study, it is proposed to define the estimate as a document that provides financial planning for variable costs through beyond budgeting management.
Estimates are developed for each production cycle for the main variable costs - direct labor costs (due to changes in production volumes and prices) and purchase of materials (due to changes in suppliers, prices for raw materials and volumes of use). In this case, an estimate for the purchase of materials is formed on the basis of an estimate of the need for materials, in which volumes of materials by types, brands, suppliers are agreed upon, with technological specifications for the manufacture of products. In addition, the estimate of overhead costs in terms of variable costs takes into account the increase or decrease in production volumes, technological energy costs and internal movement of products, etc.
As a result of the introduction of a cost management tool under the method of mixed budgeting, industrial enterprises receive additional income in the form of saving variable costs for manufacture of products.
Thus, the improvement of sustainable development management tools is proposed through the introduction of mixed budgeting based on the use of budgeting and beyond budgeting cost management in the activities of industrial enterprises. A comparative analysis of the two systems of cost planning on the characteristic positive and negative traits has been carried out. It is determined that the main element of beyond budgeting management is the estimate by which variable cost planning is carried out. The procedure of budgeting and beyond budgeting management coordination with regard to production capacity, manufacture of products and costs of materials, as well as the general scheme of interrelation of budgets and estimates have been developed.
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