5. ALTERNATIVE SOLUTIONS AND ACTION PLANS
5.1 The first solution: Build a clear process and schedule for exchange information among
Budgeting process includes many steps; in each step detailed work should be identified for responsible departments or persons. As figure out in the central problem identification, the budgeting’s objectives are not fully understood by lower levels. Besides, unclear timeline for the budgeting process also drove to low quality of budget. Therefore, the first thing to do before starting the budgeting process at the Company is declaring objectives of the organization to the people involved in the process. Once objectives are clear enough, action plan for completing those objectives would be more accuracy. Moreover, each department would understand their responsibilities and performance measurements related to the whole company targets and focus more detail on their budget to serve that purpose. Secondly, timeline should be set strictly along with the process for departments to follow. It means that in each step of budgeting process, submitted time or deadline should be identified and reminded frequently to ensure the progress will not last for too long or get out of control.
After two actions mentioned above, we go into detail about the communication among departments. This is affected by the coordination identified by the
management level. Phuc Dat Land is a leasing service company; therefore, its operation is not too complicated for departments to understand each other.
The ACCA approved content on Performance Management (8) defines that in the planning and control cycle for budgeting, in order to establish its strategies in budgeting process, organization must carry out the information gathering from all of its internal parts to find out its available resources, manufacturing capacity, the state of technical and financial situation and so on. One way for this to happen is exchanging information across the firm. Per discussing with Mr. Bao Dang – Head of Technical Department, he found it hard to obtain information from other department related to his work due to:
- Hard to finalize meeting timelines for further discussion after receiving notification about budgeting preparation from BOD. This is accounted by the busy time at the half end of fiscal year.
- Each department prepares budget by themselves and then combined by Accounting department to adjust for reaching the Company target EBITDA.
Therefore, they sometimes do not care about other departments’ budgets.
Author had another quick interview with Mr. Quang Pham – Head of Property management department and received feedbacks from him for the information given by Head of Technical Department:
‘Weekly meeting is conducted for reporting the operation within each week.
When mentioning the budget, not much information sharing as managers are familiar with the budgeting preparation by themselves and information gotten from their staff. Only when the Accounting department completes the final draft and launches for all departments that we garther and deliver our point of views to finalize the last one.’
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It can be seen that information exchanging is not highly considered in the budgeting process at Phuc Dat Land which decides the more appropriate of the budget. Thus, constrained meeting schedule should be prepared. Besides, author also recommends establishing a “Budget sharing folder” displayed on general disc of the company’s network which only authorized for manager level to access. Information from Leasing departments related to tenants, leasing status for the revenue budget, information from Property management department for next year events of renovation or maintenance and so on should be uploaded on that for other departments to utilize and cross check with their planning.
Benefits:
- Constrained schedule ensures managers at each department to strictly follow.
- Meetings are essentials for discussion and sharing ideas related to planning which is the most important part in budgeting.
- Questions would be raised during meetings for further information gathered to enhance the appropriate data input for each department’s budget.
- Save time to gather information by accessing the sharing folder, otherwise the historical figure will be saved for next year budgeting.
- Management has an overview of budgeting process through ideas shared by different department involved in and promptly inform them in case of any misunderstanding arises.
Cost:
This solution will not cost much additional cash outflow cause it only takes time and tasks allocated. However, over time will be raised for addition time added in for discussion and meetings after working period due to busy season.
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Action plan:
“Budget sharing folder” establishment:
- Personnel in charge: IT department
- Access authorization: General Director, Managers at Property Management, Sales & Marketing, Technical, Human Resources, Accounting Departments.
- Information uploaded: Leasing status, tenant check-in check-out, maintenance plan, renovation plan, external service contracts renewal, market evaluation for up-coming years, prior years actual performance and other operation information.
- Time to create the folder: 1 week before budgeting process start - Time to upload information:
Basic information: within one week after the process started
Depth information: updated during the planning step
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Meetings schedule:
Based on the Company’s process of budgeting, author suggests the following schedule for meetings with the assumption that the Budgeting process starts on August of current year and expected to complete on December:
# Meeting objectives Participants
Timetable
August September (*) October November December
1 - Review current year budget implementation and actual results for the last 4 months operation adjustment. It’s also basement for next year budget.
- Identify and clarify objectives and performance evaluation from BOD for next year
- Notice about the timeline and deadline for the next year budget
- Allocate responsibilities and person in charge of budget at each department.
- Send out the format for next year Budget set by Head office
- General Director - Head of departments - Managers and Assistant managers
First week
Time for each dept to make their plan
Page | 39 2 - Departments share their next year plan: sales,
marketing activities, operational activities, technical activities.
- Discussion on adjusting those plans and connecting those plans together to meet the targets set by BOD.
- Exchange and discuss about each department’s information updated on the Sharing folder which links directly to other department’s budget.
- General Director - Head of departments - Managers and Assistant managers
First 2 weeks
Budget preparation period
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department
- Update any significant change in each department’s plan which affects others.
- Summarize the current status and set the deadline for sending budget to Accounting department to combine in a master budget
- General Director - Head of departments - Managers and Assistant managers
Budget preparation period Last two weeks
Dept send Acct dept their budget
4 - Accounting department sent out the final draft combined budget for the whole Company
- Discussion on each department budget in the view of the whole Company’s target.
- Set time for final adjustment (if any) and final meeting.
- General Director - Head of departments - Managers
Last week
5 - Final meeting for the final budget version discussion before being sent out to the Head office and BOD.
- General Director - Head of departments - Managers
Figure 4: Meeting schedule for Budget preparation at Phuc Dat Land
(*) During the Budget preparation period, small meetings may be conducted among departments to enhance the information sharing across the firm and budget information.
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5.2 The second solution: Training for manager and assistant manager levels