In Management Accounting, there is a group of tools based on activities that play a crucial role in managerial decision-making, among them are the ABC / ABM Management and Cost System and the ABB Budget.
It can be affirmed that the efficient application of a budget in a company, allows obtaining fluid and accurate accounting information; reason why this article has been dedicated to carry out a study on the theoretical foundations of the Budget as a Business Management tool and its conceptual doctrines, based on the different criteria of international and national authors that address this topic, suggesting it as the optimal system for effectively control and manage the costs, expenses and income of an organization.
Introduction
The current world is characterized by being in constant variation and being the point of convergence of factors such as: globalization and internationalization of the markets, increasing uncertainty in the environment, notable increase in competition and an increasingly selective demand, use of quality as a competitive strategy of differentiation, increase in the diversity of products offered to the market and prediction and control of budgets.
All this has led companies to reach a new organizational culture trying to adapt to the new conditions that surround them in order to increase their commercial possibilities.
Cuban companies, also enrolled in this hostile environment, have used budget control as an important tool to manage useful information, based on the fact that budgets are an element of planning and control expressed in economic and financial terms within the framework of a strategic plan, capable of promoting integration in the different areas of the public sector.
ABB is currently considered, within business management, as a tool to succeed in the proper use of information for internal and external decision-making.
The Activity Based Budget could be adapted and adopted by any company, but the degree of generalization is low in most of the countries that are pioneers in this powerful management tool (United States of America, Canada, Australia, France, Spain and Japan).
Its execution is easier in those companies or organizations that have significant financial resources and that use the ABC / ABM Cost and Management System that bases its operations also on activities.
In Cuba, there are still no known cases of implementation of the ABB System, although it should be noted that research on this matter has been accelerated for its future introduction, mainly in tourism companies.
It is essential to perfect the current budget system, to obtain an effective control of where expenses are produced and how costs are reduced, without affecting the quality of the finished product or the service provided; as well as managing as efficiently as possible the resources that are used in the production process. But one of the great limitations lies in the lack of knowledge about the conceptual budgetary bases and the emergence of the budget as a control instrument.
For this purpose, this article has been carried out with the aim of carrying out a study on the theoretical foundations of the ABB Budget as a Business Management tool and its conceptual doctrines based on the different criteria of international and national authors that address this topic.
The Budget as a Business Management Tool
The definition of budget has been developed by authors who have investigated its need as a tool for and for the management of any company. Two of them are:
A budget is an integrating and coordinating plan that expresses in financial terms regarding the operations and resources that are part of a company for a certain period and under certain conditions, in order to achieve the objectives set by the senior management applied to each responsibility center of the organization. (Ramírez Padilla, 1997).
Budgeting is the formulation in numerical terms of plans for a given future period. Thus, budgets are statements of anticipated income, whether in financial terms - such as budgets for expenses and income and capital - or non-financial terms - such as budgets for direct labor, materials, physical sales volume or production units. - (Koontz and Weihrich, 1998).
From the above conceptualizations it can then be derived that the objectives of a budget are: 1) to systematically plan all the activities that the company must develop in money and volumes, in a given period, 2) to control the management of income and expenses of the company and measure the quantitative and qualitative results, 3) set responsibilities in the different dependencies of the organization to achieve compliance with the planned goals and, 4) coordinate the different cost centers and relate the activities of the organization.
According to Ramírez Padilla (1997) and Calderón Neyra (2002), budgets can be classified according to their flexibility, according to the period they cover, according to the field of applicability in the company, according to the sector in which they are used, according to their contained, as reflected in the Financial Statements, according to the purposes it intends, by programs, based on zero and based on activities.
The latter is our responsibility and is based on the analysis and configuration of a program of tasks, activities and consequently processes, in order to achieve greater efficiency, through continuous improvement and the elimination of those activities that do not generate value. added. For this reason, its relationship with other management tools based on activities as described below is evident.
Doctrinal foundations of ABB and its relationship with ABC / ABM and Strategic Planning
"The Activity-Based Budget -ABB-, leads to the application of the same principles of ABC / ABM so that any company that uses the latter must be capable to implement an ABB system with relative ease. "
The analysis of organizational strategies, in the first place, constitutes an important element of the ABB process since it allows establishing the appropriate relationship or links within the strategic planning process and also helps to formalize the theoretical framework within which the project will be developed. ABC / ABM system.
The combination of costing and activity-based administration is what some authors (Amat, Castelló, Lizcano, Ripoll and Tamarit) call Activity-Based Cost and Management System -ABC / ABM-, which “… arises with the purpose to improve the calculation and management of any cost objective ”.
The Activity-Based Cost System bases its operations on an adequate identification of the activities of a company, and on a system of progressive calculation and imputation of costs through them.
The cost elements are distributed among all the activities in order to know their cost and to control it over time. It is these activities that later pour their costs to the different cost objectives, which may be not only the company's products, but other objectives, such as customers, product lines, markets, among others. According to this system, the final cost of the products is calculated by aggregating the costs of those activities that generate value and have intervened in its production process.
The ABC / ABM System is based on a basic hypothesis: the different activities carried out in the company are those that consume resources and those that originate costs, not products.
Therefore, they will be used, as well as the data on their performance –ABM- to be able to effectively carry out the strategies of the organizations.
However, selecting activities is not an easy task, so it is first necessary to define them.
For Castelló (1994), an activity is a set of actions or tasks that aim to apply, at least in the short term, an added value to an object, or to allow adding this value.
According to Amat, Castelló and Soldevila (2002), an activity is a set of tasks that generate costs and that are oriented to obtaining output to raise the added value of an organization and are carried out to meet the needs of clients, whether external or internal.
The author of this research considers that an activity is a set of actions or tasks that must have as an objective the attribution of added value to an object, or at least, allow adding this value to the customer.
The value can be defined as "… the sum of the benefits that the client receives less the costs perceived by him when acquiring and using a product or service". It is also defined as “… several singular processes that form a chain when they group all the tasks' fulfillments in a delimited system, independently of the subjects that execute the tasks”.
In order to identify the activities, they can be classified following the criteria defined by Blanco (2000):
1. Activities that generate added value that increases the customer's interest in the product or service.
2. Activities that do not generate added value that can be eliminated in a reasonable period of time, and may or may not be necessary to carry out those that do provide added value.
The activities are also related in sets, which make up the total of the production processes, which are ordered sequentially and simultaneously, in order to obtain the different cost statements that accumulate in production and the value they add to each process.
Processes are defined as the entire rational organization of facilities, machinery, labor, raw materials, energy and procedures to achieve the final result.
Cost analysis leads to decomposing company objectives into specific action plans based on activities from design to distribution of products or services, and determining where added value for the customer can be increased and where it can be applied. a reduction in costs.
Therefore, the cost of activities can be related to any cost objective as modeled in Figure 1.
Figure 1.Relation of the cost of the activities with any cost objective.
Source: own elaboration from the consulted bibliography.
Organizational tactical and operational decisions require a short-term planning process to establish concrete goals and means for the operating cycle. These objectives are reflected in the budgets as said planning is established.
According to the criteria and experiences of Cooper and Kaplan (1998), various organizations have become disillusioned with their budget systems, arguing that they take a long time to prepare, are very expensive, and often do not add value to the company. In this frustration, they have abandoned the budgeting process. However, the solution has been the ABB System. (Díaz González, 2005).
With the advent of powerful and low-cost database systems, this type of budget has allowed cost reduction, better use of resources, and the broader reach of strategic objectives.
Its name in Anglo-Saxon language is Activity Based Budgeting and through it the cost estimates linked to the activities that must be undertaken to produce and sell products or services are established, therefore, the ABB System constitutes a logical methodological progression from of the ABC / ABM System.
For this reason, it is important to appreciate the criterion of Garbey (2002) when it states that activity-based costing is only part of a system made up of activity-based budgeting and activity-based management.
John Antos, in his 2004 article The New Frontier in Budget, argued that ABB is a technique for increasing the accuracy of financial forecasting and managerial understanding.
This author establishes that this system is focused on: 1) knowing the client's requirements, 2) obtaining goals and strategies of the organization or department, 3) changing products and incorporating others, 4) changing business processes and, 5) increase in efficiency and effectiveness.
According to Díaz González (2005), its advantages are clearly palpable: 1) it analyzes products or services in detail before they are executed, 2) it can quickly and with great accuracy produce models based on activity levels, 3) it helps determine what activities are required to produce the products or services and what resources should be budgeted in their execution, 4) reflects the forecast of the financial managers to know if the planned strategies have varied with the actual execution and 5) estimates the resources to be used taking take into account the output to be obtained and the factors that cause the costs -inductors- of the activities to be carried out.
The analysis of the value chain is inherent in the study of activity-based management systems. Therefore, in the following section, the relationship of this with the ABB will be discussed.
Conclusions
1. The bibliographic review corroborates the reason for the need to advance in business practice in relation to the rise of new management and cost systems, obtaining results that provide a higher level of development from the conceptual point of view of specialists of times different, in Management Accounting science.
2. Clearly define the concept of budget, its planning and importance, as well as identify the various types that exist, will give the guideline for its best application and to understand and value it as part of the administrative process within strategic planning, being a useful instrument to predict the direction of the organization based on assumptions that allow it to open the way to corporate and business success.
3. The ABB budget is a tool that is used with the purpose of effectively controlling and managing expenses and income in a company, for this reason it is essential to classify the items that support the accounts of said budget.
4. In the same way, it was known that the ABB requires knowledge of the processes and the structure of the products, through an appropriate definition of the activities.
5. The Activity Based Budget gives the possibility to develop competitive advantages to organizations that use this business management tool in conjunction with Activity Based Management and Cost Systems (ABC / ABM).
Bibliography
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