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Application Of Budgeting Techniques

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Introduction

Budget

A budget is simply a plan expressed

in financial and other quantitativeterms.

Profit Plan

Profit Planning is the development of an operational plan to achieve acompany’s goals and objectives

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Profit planning provides management

Actual production cost reports

Marketing Expenses

Administrative Expenses

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Types Of Budget

Long Range Budget

Short Range Budget

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Principles Of Budgeting

Budget Committee

Budget development & implementation

Budgeting & human behavior

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Complete Periodic Budget

Sales Budget Production Budget Manufacturing Budget

Marketing Budget Budget Income Statement Budgeted Balance Sheet Cash Budget

A budget of Capital Expenditure & Research& development Expenditure Cash Receipt & disbursements Budget

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Case Study

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Nestle

It is the Multinational Company. Ithas so many product lines. It is

originating in 1893. Nestle pure lifewas launched in 1998.

Today Nestle is fully integrated inPakistan life and is recognized asproducer of safe nutritious and tastyfood.

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Products

Nestle Milk pack

Nido

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Nestle Pure Water

Every Day

Nestle Creation

Nes vita

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Nestle Pakistan Preferences ForLong Range Budget

Nestle Pakistan is a largest &

international company it has largerange of products and it has differentbranches & offices in Pakistan. So itsbudget plans are long range plans.

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Budget Committee & theirFunctions In Nestle

Decide General Policies/Rules

Request & review individual budget

estimation of different departmentsregarding to human resources,financial production & sales budget.

This committee also recommends in

case of problems in implementingbudget.

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Factors Effect on Budgeting inNestle

Technology

Competitors actions

Economy

Demographics

Consumer tastes & preferences

Political factors

Terrorism & security issues inPakistan

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Budgeting Technique in Nestle

Condition 1: When large sales & profit last year.

Nestle company forms a budget of production with more cost & highsales budget for more sales & revenue generate.

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Budgeting Technique in Nestle

Condition 2: When Low sales & lowprofit last year or previous Records.

Nestle decrease production cost sothat cost of sales low & profit revenue

increase to balance profit purposes & goals of company.

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Nestle Rewards Policies For BudgetCommittee

Nestle Best Volunteer Program

Incentives for Budget committee

S l B d t N tl

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Sales Budget Nestle

Pakistan 2009Area Product Budget Current

MonthBudget PreviousMonth

Actual PreviousMonth

Qty Price Amount Qty Price Amount Qty Price Amount

North P1

{milk pak

250ml}

8000 15.11 120880 6000 15.11 90660 5550 15.11 83860.5

P2

{everyday

40gm}

5000 13.89 69450 4000 13.89 55560 3350 13.89 46531.5

Total 13000 190330 10000 146220 8900 130392

South p1 4000 15.11 60440 3000 15.11 45330 2500 15.11 37775

p2 2000 13.89 27780 1500 13.89 20835 1500 13.89 20835

total 6000 88220 4500 66165 4000 58610

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Promotional Budget Nestle for 2months

Activity Budget Required Details

World Call CableAdvertisement

450000 1 mint advertising 20times a day

World call cable scroll 90000 First two months afterlaunch

Magazines 32000 10000 copies everySunday

Police Relation Activities 5% of total budget i.e25000

Prize money to winnersgiving shirts & key rings.

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Production Budget Six Months

(From Jan 2009 to June

2009)NestleParticulars Jan Feb March April May June Total

Sales 8000 6500 7000 6000 8500 4000 40000

Add: ClosingStock

3000 2500 2800 2100 3500 1800 15700

Less: OpeningStock

1500 1500 1000 800 2000 500 7300

Production 10500 7500 8800 7300 10000 5300 49400

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SWOT Analysis

Strength The company is well known

for its 50 years planningmeetings.

Nestle company has a worldwide network of centers in17 locations on 4 continents.

Nestle has high level of market share thatrecognizes Nestle as a bigbrand name.

Opportunities Potential to expand to smaller

towns and other geographies.

The company has option toexpand its product folio by

introducing new brands.

Weakness Nestle is entering into market

that are already mature and

give a tough competition tonew entrants.

The company has a complexsupply chain management.

Threats Competition from the

organized as well as un

organized sectors Changing Consumer trends.

Changing economicconditions effect onimplementation of budget.

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Conclusion

As profit plan or budget represents theexpected profit level of target andmanagement strives to achieve so any

organization or business company have toset up budget policies and plans forachieving goals and targets of organizationmission.

Nestle Pakistan have followed almost good

techniques to form budget related to salesproduction , manufacturing budget andpromotional budget.

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Recommendations

Nestle Pakistan system of communication shouldallows employees to query their superiors with trust & honest.

Nestle employees should support through counselingand career planning so that they can understandimportance of budget in organization.

Marketing & sales departments play important role of implementing budgeting and get positive results. This

department knows very well about market positioncompetitors strategies. This department should helpin formation of budget.

cost amara

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