Application Of Budgeting Techniques

Introduction
Budget A budget is simply a plan expressed in financial and other quantitative terms. Profit Plan Profit Planning is the development of an operational plan to achieve a companys goals and objectives

Profit planning provides management Actual production cost reports Marketing Expenses Administrative Expenses

Types Of Budget
Long Range Budget Short Range Budget

Specific Areas OF Lang Range Profit Planning

Sales Capital Expenditures Research & development Financing

Principles Of Budgeting
Budget Committee Budget development & implementation Budgeting & human behavior

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

Case Study

Nestle
It is the Multinational Company. It has so many product lines. It is originating in 1893. Nestle pure life was launched in 1998. Today Nestle is fully integrated in Pakistan life and is recognized as producer of safe nutritious and tasty food.

Products
Nestle Milk pack

Nido

Nestle Pure Water

Every Day

Nestle Creation

Nes vita

Nestle Pakistan Preferences For Long Range Budget

Nestle Pakistan is a largest & international company it has large range of products and it has different branches & offices in Pakistan. So its budget plans are long range plans.

Budget Committee & their Functions In Nestle

Decide General Policies/Rules Request & review individual budget estimation of different departments regarding to human resources, financial production & sales budget. This committee also recommends in case of problems in implementing budget.

Factors Effect on Budgeting in Nestle

Technology Competitors actions Economy Demographics Consumer tastes & preferences Political factors Terrorism & security issues in Pakistan

Budgeting Technique in Nestle

Condition 1: When large sales & profit last year. Nestle company forms a budget of production with more cost & high sales budget for more sales & revenue generate.

Budgeting Technique in Nestle

Condition 2: When Low sales & low profit last year or previous Records. Nestle decrease production cost so that cost of sales low & profit revenue increase to balance profit purposes & goals of company.

Nestle Rewards Policies For Budget Committee

Nestle Best Volunteer Program Incentives for Budget committee

Sales Budget Nestle Pakistan 2009

Area Product Budget Current Month
Qty Price Amount

Budget Previous Month

Qty Price Amount

Actual Previous Month

Qty Price Amount

North

P1 {milk pak 250ml} P2 {everyday 40gm} Total

8000

15.11

120880

6000

15.11

90660

5550

15.11

83860.5

5000

13.89

69450

4000

13.89

55560

3350

13.89

46531.5

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

Promotional Budget Nestle for 2 months

Activity World Call Cable Advertisement World call cable scroll Budget Required 450000 Details 1 mint advertising 20 times a day First two months after launch 10000 copies every Sunday Prize money to winners giving shirts & key rings.

90000

Magazines

32000

Police Relation Activities 5% of total budget i.e 25000

Production Budget Six Months (From Jan 2009 to June 2009)Nestle

Particulars Jan Feb March April May June Total
Sales 8000 6500 7000 6000 8500 4000 40000

Add: Closing Stock Less: Opening Stock Production

3000

2500

2800

2100

3500

1800

15700

1500

1500

1000

800

2000

500

7300

10500 7500

8800

7300

10000

5300

49400

SWOT Analysis
Strength
The company is well known for its 50 years planning meetings. Nestle company has a world wide network of centers in 17 locations on 4 continents. Nestle has high level of market share that recognizes Nestle as a big brand name.

Opportunities

Potential to expand to smaller towns and other geographies. The company has option to expand its product folio by introducing new brands.

Weakness
Nestle is entering into market that are already mature and give a tough competition to new entrants. The company has a complex supply chain management.

Threats
Competition from the organized as well as un organized sectors Changing Consumer trends. Changing economic conditions effect on implementation of budget.

Conclusion
As profit plan or budget represents the expected profit level of target and management strives to achieve so any organization or business company have to set up budget policies and plans for achieving goals and targets of organization mission. Nestle Pakistan have followed almost good techniques to form budget related to sales production , manufacturing budget and promotional budget.

Recommendations
Nestle Pakistan system of communication should allows employees to query their superiors with trust & honest. Nestle employees should support through counseling and career planning so that they can understand importance of budget in organization. Marketing & sales departments play important role of implementing budgeting and get positive results. This department knows very well about market position competitors strategies. This department should help in formation of budget.