FEW BUSINESS PLAN TO FAIL , BUT OF THOSE FLOP, FAILED

TO PLAN

1Monika 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%.

2Monika Kansal, University Business School, PURC,

Ludhiana

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_______________

3Monika Kansal, University Business School, PURC,

Ludhiana

Short term budgets may be monthly or quarterly or biannually.

4Monika Kansal, University Business School, PURC,

Ludhiana

Helps in coordinating what needs to be done

Uncertain future

5Monika Kansal, University Business School, PURC,

Ludhiana

Covers

• Both financial and non financial aspects

6Monika Kansal, University Business School, PURC,

Ludhiana

Financial statements regarding the future

7Monika Kansal, University Business School, PURC,

Ludhiana

Alternative terminology

• Performa statements• Targeting• Profit planning

8Monika Kansal, University Business School, PURC,

Ludhiana

Types of budgets

From flexibility point of view• Static/ fixed• Flexible

9Monika Kansal, University Business School, PURC,

Ludhiana

Flexible

• Conjures more realistic picture of actual variances

10Monika Kansal, University Business School, PURC,

Ludhiana

In flexible budget emphasis is on

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

11Monika Kansal, University Business School, PURC,

Ludhiana

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)

12Monika Kansal, University Business School, PURC,

Ludhiana

MATERIALS ARE VARIABLE COSTS.

13Monika Kansal, University Business School, PURC,

Ludhiana

SILK WORMS

14Monika Kansal, University Business School, PURC,

Ludhiana

Indirect materials

Indirect labour

Indirectexpenses

FIXED

VARIABLE

SEMI –VARIABLE

15Monika 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

16Monika Kansal, University Business School, PURC,

Ludhiana

Is budget a forecast

• Assessment of probable future events

TATA SMALL CAR17Monika Kansal, University

Business School, PURC, Ludhiana

Budget is the implication of the forecast

• Budgets starts where forecasting ends

18Monika Kansal, University Business School, PURC,

Ludhiana

Budget is a part of budgetary control

PLANNING

CONTROLLING

COORDINATING

BUDGETARY CONTROL

BUDGETS

19Monika Kansal, University Business School, PURC,

Ludhiana

Meaning of budgetary control

Establishment of budgetsContinuous comparisonsRemedial action Revision of standards ,if necessary

ACTUAL BUDGETED

20Monika Kansal, University Business School, PURC,

Ludhiana

Budget ManualA 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

21Monika Kansal, University Business School, PURC,

Ludhiana

Budget period

SHORT TERM LONG TERMANNUAL

22Monika Kansal, University Business School, PURC,

Ludhiana

STRATEGIES

SHORT TERMPLANNING

LONG TERMPLANING

SHORT TERM BUDGETS

LONG TERM BUDGETS

23Monika Kansal, University Business School, PURC,

Ludhiana

Master budget

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

24Monika Kansal, University Business School, PURC,

Ludhiana

A case study- a million more cars

Demand forecast for 2010 – 2.2 to 2.3 million cars society of Indian Automobiles ManufacturersSource- BW,29 jan 2007

25Monika 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

26Monika Kansal, University Business School, PURC,

Ludhiana

Long term strategiesbig –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

27Monika Kansal, University Business School, PURC,

Ludhiana