Finance help in business plans. Scheming our finance help is central throughout life. As we grow older, changes in lifestyle can make it even more important that we know where our money goes. Things like lower income, more leisure time, different needs reduced mobility or the loss of a partner may all affect how we use our money.
The plans can be classified as follows:
STANDARD OR REPEATED USE PLANS A. Objectives. Objectives are the ends for the achievement of which managerial activities are directed. Effective management is possible only through the setting up of objectives and all managerial efforts should be directed to achieve these objectives. Objectives constitute the purpose, the attainment of which is necessary for the business. An organization can grow in an orderly way if well defined goals have been set. Objectives are a pre-requisite for planning. No planning is possible without settings up of objectives are not only helpful in planning but also in other managerial functions like organizing, directing and controlling.
Clear out objectives help in proper decision making and in achieving better results. Profit earning was considered to be the only objective of the business in the recent past. But it is no longer true now. No doubt, profit is the main objective of a business concern but it is not the only objective. The awareness of social responsibility has exploded the myth of profit. B. Policies. Policies are the general statements which are formulated by an organization for the guidance of its personnel. The objectives finance help are first formulated and then policies are planned to achieve them. Policies are a mode of thought and the principles underlying the activities of an organization or an institution. Though objectives and policies are used to achieve organizational goals but both are different in essence. The objectives are the goals and the policies are the ways to achieve them. The objectives are the end points of planning and policies prescribe the broad ways for achieving them. A policy gives a guideline and leaves scope for interpretation for the person implementing them. This means that a policy has the flexibility for interpretation. A rigid policy becomes a rule. C. Procedures. Procedures are details of action or the guidelines for the achievement of business objectives. Procedures give details of how things are to be done. No room is left for judgment. These should help in implementation of policies. Procedures also determine the policy of responsibility and accountability. Procedures should be distinguished from policies. A procedure is a guide to action where as policy is a guide to thinking. Policies are guidelines for taking decisions and procedures consist of various methods to accomplish each phase of work. Policies offer scope for interpretation in order to see that they fit in a particular situation whereas procedures are tailor made and do not offer any scope for interpretation. A procedure is explained with the help of taking the case of purchasing raw materials for a concern. D. Rules. A rule is a plan that lays down a required course of action with regard to a situation. A rule is in the nature of a decision made by management regarding what is to b e done and what is not to be done in a particular situation. A rule is definite and rigid and allows no deviation or discretion to the subordinates. Like procedures, rules do not prescribe a chronological sequence of steps to be taken to achieve a given objective. A rule may or may not be a part of the procedure. E. Strategies. A strategy is a technique of our maneuvering the opponent.
A planner should see the plans and policies of his competitors and then modify or readjust his plans so that he may prove the superiority of his product or service. It is difficult to distinguish between policies and strategies, sometimes both are used interchangeably. A strategy is a finance help policy in the respect that it is a broad guide to thinking but a strategy is a particular kind of policy.
III. SINGLE USE PLANS A. Programs. A program is a sequence of activities designed to implement policies and accomplish objectives. It is devised to meet a particular situation. Program may be taken as a combination of policies, procedures, rules, budgets, task assignments developed for the specific purpose of carrying out a particular course of action. Separate program are prepared for accomplishing different tasks. The same program may not b e used for achieving other goals. It is a single use plan laid down for new and non-repetitive activities. B. Budgets. A budget is the monetary and quantitative expression of business plans and policies to be pursued in the future period of time. The term budgeting is used to preparing budgets and other procedures for planning, coordination and control of business enterprise.
CLASSIFICATION AND TYPES OF BUDGETS The budgets are usually classified according to their nature. The following are the types of budgets which are commonly used. A. Classification on the basis of time 1. Long term budgets. The budgets are prepared to depict a long term planning of the business. The period of long term budgets varies between five to ten years. The long term planning is done by the top level management, it is not generally known to lower level of management. Long term budgets are prepared for some sectors of the concern such as capital expenditure, research and development, long term finances. These budgets are useful for those industries where gestation period is long. 2. Short term budgets. These budgets are generally for one or two years and are in the form of monetary terms. The consumers goods industries like sugar, cotton, and textile use short term budgets. 3. Current budgets. The period of current budgets is generally of months and weeks. These budgets relate to the current activities of the business. Classification on the basis of functions 1. Functional or subsidiary budget. These budgets are related to different functions, the number of these budgets depends upon the size and nature of the business. The commonly used functional budgets are: a. sales budget b. Production budget include: i. Raw material budget ii. Labor budget iii. Plant utilization budget c. Purchase budget d. Cash budget e. Finance budget 2. Master budget. These budgets are prepared by the budget office and it remains with the top level management. This budget is used to coordinate the activities of various functional departments and is also helping as a control device. C. Classification on the basis of flexibility 1. Fixed budget. The fixed budgets are prepared for a given level of activity the budget is prepared before the beginning of the financial year. Fixed budgets are suitable under static conditions. If sales, expenses and costs can be forecasting with greater accuracy, this budget can be advantageously used. 2. Flexible budget. A flexible budget consists of a series of budgets for different levels of activity. It, therefore, varies with the levels of activity attained. A flexible budget is prepared after taking into consideration unforeseen changes in the conditions of the business. A fixed budget is defined as a budget which by recognizing the difference between fixed and variable cost is designed to change in relation to the level of activity. The flexible budgets will be useful where level of activity changes from time to time. When the forecasting of demand is uncertain and the undertaking operates under conditions of shortage of materials, labor then the budget will be more suited.
The plans can be classified as follows:
STANDARD OR REPEATED USE PLANS A. Objectives. Objectives are the ends for the achievement of which managerial activities are directed. Effective management is possible only through the setting up of objectives and all managerial efforts should be directed to achieve these objectives. Objectives constitute the purpose, the attainment of which is necessary for the business. An organization can grow in an orderly way if well defined goals have been set. Objectives are a pre-requisite for planning. No planning is possible without settings up of objectives are not only helpful in planning but also in other managerial functions like organizing, directing and controlling.
Clear out objectives help in proper decision making and in achieving better results. Profit earning was considered to be the only objective of the business in the recent past. But it is no longer true now. No doubt, profit is the main objective of a business concern but it is not the only objective. The awareness of social responsibility has exploded the myth of profit. B. Policies. Policies are the general statements which are formulated by an organization for the guidance of its personnel. The objectives finance help are first formulated and then policies are planned to achieve them. Policies are a mode of thought and the principles underlying the activities of an organization or an institution. Though objectives and policies are used to achieve organizational goals but both are different in essence. The objectives are the goals and the policies are the ways to achieve them. The objectives are the end points of planning and policies prescribe the broad ways for achieving them. A policy gives a guideline and leaves scope for interpretation for the person implementing them. This means that a policy has the flexibility for interpretation. A rigid policy becomes a rule. C. Procedures. Procedures are details of action or the guidelines for the achievement of business objectives. Procedures give details of how things are to be done. No room is left for judgment. These should help in implementation of policies. Procedures also determine the policy of responsibility and accountability. Procedures should be distinguished from policies. A procedure is a guide to action where as policy is a guide to thinking. Policies are guidelines for taking decisions and procedures consist of various methods to accomplish each phase of work. Policies offer scope for interpretation in order to see that they fit in a particular situation whereas procedures are tailor made and do not offer any scope for interpretation. A procedure is explained with the help of taking the case of purchasing raw materials for a concern. D. Rules. A rule is a plan that lays down a required course of action with regard to a situation. A rule is in the nature of a decision made by management regarding what is to b e done and what is not to be done in a particular situation. A rule is definite and rigid and allows no deviation or discretion to the subordinates. Like procedures, rules do not prescribe a chronological sequence of steps to be taken to achieve a given objective. A rule may or may not be a part of the procedure. E. Strategies. A strategy is a technique of our maneuvering the opponent.
A planner should see the plans and policies of his competitors and then modify or readjust his plans so that he may prove the superiority of his product or service. It is difficult to distinguish between policies and strategies, sometimes both are used interchangeably. A strategy is a finance help policy in the respect that it is a broad guide to thinking but a strategy is a particular kind of policy.
III. SINGLE USE PLANS A. Programs. A program is a sequence of activities designed to implement policies and accomplish objectives. It is devised to meet a particular situation. Program may be taken as a combination of policies, procedures, rules, budgets, task assignments developed for the specific purpose of carrying out a particular course of action. Separate program are prepared for accomplishing different tasks. The same program may not b e used for achieving other goals. It is a single use plan laid down for new and non-repetitive activities. B. Budgets. A budget is the monetary and quantitative expression of business plans and policies to be pursued in the future period of time. The term budgeting is used to preparing budgets and other procedures for planning, coordination and control of business enterprise.
CLASSIFICATION AND TYPES OF BUDGETS The budgets are usually classified according to their nature. The following are the types of budgets which are commonly used. A. Classification on the basis of time 1. Long term budgets. The budgets are prepared to depict a long term planning of the business. The period of long term budgets varies between five to ten years. The long term planning is done by the top level management, it is not generally known to lower level of management. Long term budgets are prepared for some sectors of the concern such as capital expenditure, research and development, long term finances. These budgets are useful for those industries where gestation period is long. 2. Short term budgets. These budgets are generally for one or two years and are in the form of monetary terms. The consumers goods industries like sugar, cotton, and textile use short term budgets. 3. Current budgets. The period of current budgets is generally of months and weeks. These budgets relate to the current activities of the business. Classification on the basis of functions 1. Functional or subsidiary budget. These budgets are related to different functions, the number of these budgets depends upon the size and nature of the business. The commonly used functional budgets are: a. sales budget b. Production budget include: i. Raw material budget ii. Labor budget iii. Plant utilization budget c. Purchase budget d. Cash budget e. Finance budget 2. Master budget. These budgets are prepared by the budget office and it remains with the top level management. This budget is used to coordinate the activities of various functional departments and is also helping as a control device. C. Classification on the basis of flexibility 1. Fixed budget. The fixed budgets are prepared for a given level of activity the budget is prepared before the beginning of the financial year. Fixed budgets are suitable under static conditions. If sales, expenses and costs can be forecasting with greater accuracy, this budget can be advantageously used. 2. Flexible budget. A flexible budget consists of a series of budgets for different levels of activity. It, therefore, varies with the levels of activity attained. A flexible budget is prepared after taking into consideration unforeseen changes in the conditions of the business. A fixed budget is defined as a budget which by recognizing the difference between fixed and variable cost is designed to change in relation to the level of activity. The flexible budgets will be useful where level of activity changes from time to time. When the forecasting of demand is uncertain and the undertaking operates under conditions of shortage of materials, labor then the budget will be more suited.
