Budgeting Methodology in Relation to Management Reporting

Abstract

In order to effectively manage the company's resources, it is necessary to draw up financial plans, control the flow of income and expenses, and correlate strategic and managerial decisions with the current economic situation. These tasks can be implemented through budgeting. The article aims to generalize the theoretical and methodological principles of budgeting and management reporting and substantiate recommendations for their improvement based on the analysis of best international practices. It was determined that budgeting is considered as: 1) a management function characterized by general scientific and practical approaches to the goal, purpose, tasks and functional content; 2) an element of the management accounting system concerning management reporting. The factors causing the problem of low budgeting efficiency in Ukrainian enterprises were disclosed. The research draws a parallel between traditional budgeting systems, which have proven themselves in the practice of Ukrainian enterprises, and innovative ones of foreign origin. It was proposed to use instrumental technologies of Lean and frugal production in budgeting. It was recommended to develop the ideology of budgeting based on the philosophy of praxeology. This approach will increase the role of budgeting in making managerial decisions. It was determined that an important element of the budgeting process is the internal management reporting system, which is formed in connection with the design and content of budgets. Innovative budgeting methods are factors in the development of the management reporting system. Management reporting should be improved in terms of form, content and design. The authors consider the design of management reporting as a bridge between the executor and the consumer of the information product, capable of increasing the level of understanding and trust between the management accounting accountant and the decision-making centre, i.e. the manager (owner).

Keywords

• budgeting
• budget
• lean production
• praxeology
• management reporting
• management accounting