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Beyond Budgeting ARAY Julia NAUMOVA Anna Rogoza Olesya I. Baranov

Beyond Budgeting

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Beyond Budgeting. ARAY Julia NAUMOVA Anna Rogoza Olesya I. Baranov. - PowerPoint PPT Presentation

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Page 1: Beyond Budgeting

Beyond Budgeting

ARAY Julia NAUMOVA Anna

Rogoza Olesya

I. Baranov

Page 2: Beyond Budgeting

Beyond budgeting is….a positive idea that uses the

abandonment of budgeting as a trigger for improving the entire management control

process.

Extract from the Foreword by Dr. Charles T.Homgren, Professor of Accounting, Stanford University.

Page 3: Beyond Budgeting

So-called model Beyond Budgeting Model has been

developed by the organization with same name Beyond Budgeting

Roundtable, abbr. BBRT, based the Great Britain in 1998. It includes 60 companies from the Great Britain,

the Europe and the USA.

Page 4: Beyond Budgeting

The Beyond Budgeting Model is designed to:

overcome traditional barriers

create a flexible, adaptable organization

That gives to local managers the self-confidence and freedom to think differently, make decisions rapidly, and collaborate on innovative projects with colleagues in multifunctional teams both within company and across its borders.

Page 5: Beyond Budgeting

Twelve principles of BB

Page 6: Beyond Budgeting

The Beyond Budgeting Model is a new approach to budgeting, and also a holistic approach to strategy management, business planning, target setting, rolling and event-driven forecasting, and business-performance management based on financial and non-financial key performance indicators.

Page 7: Beyond Budgeting

Traditional versus Beyond Budgeting

Page 8: Beyond Budgeting

Traditional Budgeting

Pro:• Part of control system• Fixed financial targets• Financial incentives• Annual plans- the best

ways to max market opportunities

• Leaders are the best placed in resource allocation

Contra:• Budgets lack

sufficient strategic orientation

• Budgets ignore the turbulence of markets

• Budgets lead to inappropriate (unethical) management behavior

Page 9: Beyond Budgeting

Relations among different budgeting concepts

Beyond Budgeting

Advanced Budgeting

Better Budgeting

Traditional Budgeting

Increasing radical changes

Potential number of users

Page 10: Beyond Budgeting

Beyond budgeting Pro:

• Faster response • Innovative strategies• Lower costs • More loyal

customers

Contra:• Problems relating to its

small circle of potential users

• The difficulty of managing without budgets

• Not justify the associated high costs

• Fear of Change • The lack of empirical

evidence concerning its use

Page 11: Beyond Budgeting

Robin Fraser, Jeremy Hope. Beyond Budgeting(Hardcover, 2003)

Beyonв Budgeting: boon or boondoggle?, Robert C. Rickards Investment Management and Financial Innovations, Volume 3, Issue 2, 2006 62

Beyond Budgeting or Better Budgeting?, Bytheresalibby, Ca. and R. Murraylindsay, Strategic Finance, 2007

Beyond Budgeting: questions and answers, Jeremy Hope, Robin Fraser, 2001

www.bbrt.org

References

Page 12: Beyond Budgeting

To make planning a constant and overall process Constant

adaptiveprocessTo coordinate

actions according to the

demand

√ to base goals on the EXTERNAL

performance indicators;√ to set HEIGHTENED goals

To coordinate reward with the

RETROSPECTIVEevaluation

To base controlon the effective

managerial principlesand a set of the

performance indicators To provide an

accessibility of theresources needed

Page 13: Beyond Budgeting

Svenska HendelsbankenDeutsche Bank

Southwest airlinesBorealis

Ahlsell Rhodia

Toyota Volvo

IKEA

Page 14: Beyond Budgeting

goals

key performance indicators

in comparison with the market indicators • disposal of the influence of the uncontrollable

input factors• measurement of the managerial

improvements

Managers: - reward is based on KPI; - more freedom in actions

(and more responsibilities)

Page 15: Beyond Budgeting

• Enterprise Resource Planning: fluent reaction to the demand(the center – operations, not departments & functions)

• Forecasts: - are made according to the results of previous quarters - separated from the evaluation of efficiency and control- based on the moving average

Cost center

Current month

The same month last year

Cumulative total for the current year

Moving average for 12 months

% changes of the moving average for the last year

Internal reporting of Borealis

Page 16: Beyond Budgeting