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Budget Improvement

I need, in your opinion, 9-11 or so ways that the budgeting processes in a manufacturing or merchandising company (any company really) can be improved either by direct material purchases, direct labor, manufacturing overhead, and operating expenses (more so on the operating expenses side).

I am not looking for a "how-to" budget.

I was recently laid off from a publishing (in-house manufacturing) company that had no budget at all. They just weren't ready for change in terms of putting together a budget. Your suggestions and insight will help me in my next position, so I know what I can do to combat a possible similar situation.

Solution Preview

Budgeting process in a manufacturing company can be improved by considering following points:

1.Before preparing the budget for direct material purchases, direct labor, manufacturing overhead, and operating expenses, the expected sales for the period must be considered. As these costs are directly related with the units produced and sold.

2.While estimating month wise sales, seasonal demand for the product must be considered. For example demand for cold drinks or ice cream is comparatively higher in summer than winter. This would helps in estimating sales correctly rather than under-estimation and over-estimation.

3.Month wise collection should be calculated after considering credit policy of the company and normal pattern in which account receivables are collected in the past. Bad debt percentage should also be considered.

4.After estimating sales for the period, production required to meet the demand can be decided. While ...

Solution Summary

The solution explains how to prepare the budget.

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