BDFS Regulations (Cash Flow Budgeting) using the example of Production

The purpose of any regulation is to streamline the activities of participants in the budget process during planning, analyze and control the execution of the cash flow budget, as well as a detailed description of all significant components of the system. This article will discuss the regulations for budgeting cash flows at an enterprise, in accordance with established uniform methodological rules.

Objectives of the regulation

The regulations establish the composition of the data necessary for budget formation, the procedure for their provision, the principles of accounting and processing of planning and reporting information, the rights and obligations of participants in the budget process.

Responsibility for organizing work in accordance with the provisions of the Regulations is exercised by the Financial Director, ensuring strict implementation of regulated procedures by all departments and services, as well as employees of the organization.

The regulation of the “Budgeting” business process is mandatory for execution by all services specified in it; its execution can serve as a criterion for assessing the performance of a department.

Functions of the cash flow budgeting system

The main functions of the DDS budgeting system include:

To increase the efficiency of the budgeting system, a matrix principle of distribution of responsibility is provided by organizing planning horizontally (by budget items) and vertically (by centers/subcenters of responsibility).

Methodology of the Regulations

The work of the Regulations is carried out in accordance with the following blocks.

1. DDS planning block (annual plan and monthly plan)
1.1 Filling out and conducting budgets of the Central Federal District (for the month: before the start of the planned month 5 days; for the year: November).
1.2. Optimization of the DDS plan and elimination of cash gaps (for the month: 3 days before the start of the planned month; for the year: the first week of December).
1.3. Coordination of the DDS plan in the context of the Central Federal District with their leaders (for the month: 2 days before the start of the planned month; for the year: 2nd and 3rd week of December).
1.4. Approval of the general and operating budgets of the Central Federal District (for the month: 1 day before the start of the planned month; for the year: 4th week of December).

2. Block of payments and current control
2.1. Filling out and maintaining a register of incoming payments. At this stage, the compliance of actual incoming payments with the plan on a daily and monthly basis is also monitored.
2.2. Filling out the register of outgoing payments and conducting it. At this stage, we also monitor the compliance of actual outgoing payments with the plan on a daily and monthly basis.

The formation of outgoing payment registers is carried out on the basis of payment requests submitted in electronic (paper) form

3. Forecasting
Forecasting is a tool for providing data regarding the prospects for the financial situation of an enterprise based on plans and actual trends in the receipt and expenditure of funds.

In other words, this is the process of modeling the future situation in an enterprise or firm, which is based on both planned and actual indicators.

The forecasting mechanism is based on the choice of a base period. The base period is a period, when selected, data from the beginning of the month (year) to the selected date (month), inclusive, is taken from actual movements, then - from the day (month) following the base date to the end of the month (year) - from planned movements .

It is most effective to take the last period (date) for which the fact has already been filled in as the base date.
The main task of monthly forecasting is to anticipate in advance a possible decrease in cash balances from the plan or the occurrence of cash gaps.

The year forecast must be carried out monthly at the end of the month.

4. Control block
Plan-fact analysis of the compliance of planned and actual DDS payments. The sequence, responsible persons and timing of management operations indicated in Table 1:

Table 1

	Operation	Responsible person	Date	Document
	Block “Planning DDS”
	Filling out and conducting budgets of the Central Federal District	Responsible person of the Central Federal District (see section 2, paragraph 2.1.)	For the month: until the 25th of each month, for the year: November.	Form “BDDS for the Central Federal District”
	Optimization of the DDS plan and elimination of cash gaps	Economic service	For the month: before the 27th of each month, for the year: 1st week of December	Form "BDDS consolidated"
	Coordination of the DDS plan (familiarization with the plan) in the context of the Central Federal District with their managers	Economic service	For a month: before the 28th of each month; for the year: 2nd and 3rd week of December
	Approval of the general budget	Financial Director	For a month: before the 30th of each month; for the year: 4th week of December	Printable budget forms
	Block “Payments and current control”
	Filling out and maintaining a register of incoming payments	Accountant, Commercial Department	Every day, until 10.00	Form “Register of Inputs.”
	Providing invoices and other documents for payment (or conducting applications for payment of the Central Federal District in electronic form)	Authorized person of the Central Federal District - Accountant	Every day, until 9.00	Application for payment
	Filling out the register of outgoing payments	Accountant	Every day, until 10.00	Form "Register Ex."
	Approval of the register of outgoing payments	Economic Service; Financial Director	Every day, until 11.00
	Block "Control"
	Comparison of planned and actual payments	Economic service	Every day, throughout the day
	Request to the head of the Central Federal District regarding budget deviations	Economic service	As needed. If deviations from the current budget are more than 5%.
	Justification for deviation from budget	Responsible person of the Central Federal District	Within 4 hours after receiving the request	Request form and justification in Appendix 2 of the Regulations
	Forecasting
	Monthly Forecast	Economic service
	Forecast of the year	Economic service	Monthly, at the end of month planning

* an order is signed to fulfill the duties of approving registers and carrying out ongoing control of payments in the absence of the main executor (General Director).

List of enterprise budgets

The main budget that regulates the activities of the enterprise for the month is the monthly budget of the DDS (general budget of the month).

The main budget regulating the activities of the enterprise for the year is the annual budget of the DDS (general budget of the year.

The financial structure of the enterprise uses seven operating budgets.

1. The main budget is the general cash flow budget (by year and by month), compiled in two forms:

• cash flow plan;
• fact of cash flow.

2. Operating budgets:

table 2

Operating budget data is formed as a set of data from certain DDS items.

Budget adjustment

In the event of a significant change in the current production or financial situation at the enterprise, the General Budget of the month (year) can be adjusted for one or more items.
The application is submitted by the head of the Central Federal District, responsible for planning and spending funds on variable items.

Reasons for adjusting the budget:

• transfer of funds from one item to another;
• changes in the result of cash flow in the Central Federal District (changes in the income or expense component).

Planning is opened for the period specified in the memo.

Optimizing your cash flow plan

Optimization of the DDS plan can be of the following types:

• primary optimization carried out during the approval of the DDS plan (block “Planning”;
• subsequent optimizations carried out after adjusting the DDS plan (block “Current activities”).

The main objectives of optimizing the DDS plan are:

1. Elimination of cash gaps (lack of funds to pay bills and other debts).
2. Planning cash balances and increasing the efficiency of their use.
3. Clear financing of planned projects in order to fulfill the strategic plans of the enterprise.

Optimization of the DDS plan is carried out by the economic service.

Analysis of budget execution of financial flows

If there are plan-factual deviations in the monthly budget of the Central Federal District by item exceeding 10%, the responsible person (head) of the Central Federal District provides a memo describing the reasons for the deviations in the monthly budget.

A description of the reasons for deviations when the specified maximum percentages are exceeded is carried out both in case of overexpenditure and in case of savings by item and applies to both income and expense items.

A general analysis of budget execution is carried out through plan-fact analysis of DDS.

When developing a payment management policy, special attention must be paid to interaction with the budget management loop. This is not only the establishment of limits, the development of a payment calendar and the formation of the actual execution of the BDDS, but also a clear distribution of duties and responsibilities between the treasury and budgeting services. I completely agree that the payment management regulations must be observed by all employees and, first of all, by the financial and general director. To pay for extra-budgetary and off-budget payments, a special fund should be created, controlled, for example, by the general director. In addition, you can use the procedure for redistributing limits from one line to another.

Payment classification will significantly reduce the burden on senior management when reconciling payments on a daily basis. One cannot but agree that payments are prioritized according to the likelihood of negative consequences and the degree of their impact on the company’s financial results. In this case, both existing relationships with debtors and creditors, as well as the terms of the debts themselves, must be taken into account.

When building a cash management system, it is important to optimize the relevant business processes, for which it is necessary to determine:

• - composition of the central financial districts, according to which cash budgets are formed and controlled;
• - participants in the process, that is, company employees acting as payment initiators, controllers of compliance with internal regulations, acceptors;
• - responsibilities and powers of each participant in the business process, in particular in determining payment limits, and those responsible for making decisions on certain payments;
• - time schedule for payments, in particular, establish the timing and sequence of applications for payment.

In the future, this will reduce the labor costs of the company’s top managers (general and financial directors) to control the expenditure of funds. If previously they had to review and sign each payment request, now that the expense amounts are approved in the budgets and the procedure for approving payments is formalized, control over funds can be entrusted to the financial manager. Accordingly, the financial (general) director will approve only a limited number of payments, usually above the limit, large or irregular. For example, it is enough to agree on the amount of payment for office rent once when approving the budget, leaving control of the payment procedure itself and compliance of the amounts with the budget with the financial manager.

Clear regulation of cash management processes will allow the financial director not to be distracted by solving less important tasks. For example, even a simple requirement to indicate when invoicing for payment the name of the responsible manager, who will have to submit a report on the amounts paid, makes it possible to reduce the labor costs of the financial director, as well as unjustified expenditure of funds. It should be noted that the cash management regulations allow you to avoid disputes with line managers about allegedly untimely payments: it is clear to everyone on what basis money is allocated for this. In addition, situations are excluded when a manager, two minutes before the end of the payment day, brings a request for payment with a requirement to pay today.

Properly structured business processes help solve another pressing problem - to minimize the risk of abuse by company employees by separating the functions of monitoring payments and their initiation. For example, the head of a business area accepts all requests for payment in his financial center and is responsible for implementing the budget, and a financial service employee (this could be a financial director, financial manager) monitors the compliance of requests with budget limits and the implementation of regulatory procedures of the payment system.

Currently, subsidiaries and dependent companies are being created, which do not yet have experience of independent economic activity in market conditions. In order to minimize the risk of loss of assets when they are transferred to subsidiaries, as a temporary measure during the period of their formation, it is planned to soon transfer to the treasury principle of payment execution subsidiaries and affiliates that are strategically important for the company. As for the treasury control system directly in the parent company, thanks to the direct subordination of the treasury to the company's top management, we eliminated unscheduled payments, suspended the financing of expense items in case of non-fulfillment of income items, and also ensured that cash flows strictly corresponded to the established plan and the ability to build a reliable cash flow report funds by direct method.

A properly constructed payment system, of course, allows you to solve many problems facing a financial director. However, it must be remembered that no payment system will completely protect an enterprise from:

• - abuses associated with the use of fly-by-night companies or “artificial” inflated prices. Accordingly, other measures must be taken, in particular, verification of counterparties by the company’s security service when concluding a contract;
• - errors made during the conclusion of the contract. The process of signing a contract must be adequate in terms of protection from the “human factor” to the process of submitting an application for payment;
• - expenses the occurrence of which is not related to the moment of payment. In this case, the application for payment indicates a fait accompli of the expense (for example, a work acceptance certificate signed by an authorized person), so the employee who makes the decision on payment can no longer prevent the expense.

Optimized business processes for managing the cash flow of an enterprise are enshrined in regulatory documents, for example in the “Procedure for making payments in the company.” These documents are approved by internal order and are binding on all divisions of the company. An internal document defining the rules for the functioning of the company's payment system will necessarily contain information about the procedure for processing applications for payment, deadlines, those responsible for approval, duties and powers of employees, and the sequence of actions.

The application goes through three levels of control. The head of the Central Federal District checks the expediency and validity of this expense, an employee of the planning and budgeting department checks the presence of limits in the budget of the Central Federal District for this type of expense in a given period, and an accounting employee checks the correctness of paperwork for payment and the absence of debts on calculations and submission of documents for this counterparty and employee . All checks for extraordinary applications are allotted two hours, for regular applications - up to two working days. After this, the application, depending on the amount and budget coding, goes to the head of the treasury, financial or general director who makes a decision on payment. Then the application is sent to the treasury, which, depending on the time of receipt and priority, pays it on the same day or the next.

This company has developed the following payment schedule. All invoices for payment and business agreements go to the accounting department, where the preparatory “rough” work is carried out to check payment details, payment terms, etc. After this, the data is entered into the payments register, which is sent to the treasury, where payments are checked for compliance with the approved budget. In the absence of funds sufficient to satisfy all received applications, the Treasury prepares proposals for the redistribution of money or cancels one or another payment. The final version of the register, together with treasury proposals and payment documents, is transferred to the financial director, who makes the final decision on payment of invoices.

It should be noted that a well-developed regulation should prevent failures in the management of the payment system, be transparent and unambiguously interpret the actions of a particular employee. However, this cannot always be verified until the regulations are put into operation. Therefore, it is normal practice for regulations to be adjusted during use and re-approved along with the changes.

Business processes for the operational management of the enterprise’s cash flow and the generation of payment documents in the company are defined in the Payment Regulations. This document describes all stages of cash flow - from the initiation of payment by the budget holder to the sending of payment documents to the bank. The initiator of the payment is the structural unit within the framework of whose expenditure budget the corresponding agreement was concluded. Based on the budgets of structural divisions approved by the financial director for the current year, a monthly plan for financing their expenses is formed, which is the basis for drawing up a payment calendar. Each application for payment is accepted by the heads of structural divisions and approved by “loan managers” in accordance with the limits established in their powers of attorney. The functions of compiling and monitoring the execution of the payment calendar and cash flow budget are assigned to the treasury operations department. The payment calendar, compiled simultaneously with the clarification of the BDDS for each month, allows you to identify in advance the likely shortage (or excess) of funds.

Each company has several regulatory documents that detail the powers of managers to initiate payments and the procedure for approving payment requests. For all payments, depending on the amount, responsibility is assigned either to the head of the directorate to which the Central Federal District belongs, or to a subordinate manager. A CEO visa is required for certain types of payments and only if the limits established during monthly planning are exceeded. The financial directorate monitors compliance with regulations. The payment calendar is compiled for a calendar month by day and is updated weekly for the coming week.

Payment initiators are service managers of the enterprise who manage contracts. They draw up an order for payment (approved form), which is accepted by the head of the given Central Federal District, checked by the responsible treasury executive, signed by the chief accountant and the head of the treasury and finally agreed upon with the loan manager (usually the financial director, in special cases - the general director). For us, this is a fairly simple procedure, which is spelled out in detail in special regulations approved by the General Director.

Each item of cash expenditure is assigned one of the following payment priorities:

• 1. priority of the first priority - payments, a delay in which could cause serious negative consequences for the company, for example, penalties or deterioration of business reputation. Such payments include paying taxes and repaying loans. Paid by the financial service strictly in accordance with the payment deadline specified in the application;
• 2. priority of the second priority - payments for which a delay in payment for up to three banking days is acceptable without serious negative consequences for the company (payment of wages, payment to main suppliers);
• 3. priority of the third priority - payments for which it is permissible to postpone payment terms by more than three banking days. If the revenue plan is not met, the financial service has the right to initiate reductions in such budget items or cancellation of such payments. If the financial service has changed the payment terms specified by the initiator in the payment application, then it must notify the initiator about this.

In practice, a situation often arises when the revenue plan is not fulfilled, but the cash expenditure plan is fulfilled in full; accordingly, the total amount of requests for payment exceeds the actual receipt of funds. To avoid cash gaps, it is advisable to rank all payments according to their priority or importance. Articles with the highest priority are paid without fail, while articles with lower priority are subject to additional conditions. For example, applications for payment of debts to major suppliers of products, taxes, etc. are paid first, while costs for training and modernization of office equipment are financed when the sales plan is fulfilled by at least 90%.

According to entrepreneurs, in conditions of a shortage of funds, payments should be made first on those obligations, the violation of which will lead to the greatest financial losses (expressed in penalties and fines, production downtime, etc.).

The priority of payments in the company is determined by the terms of payment of bills and contracts, taken into account when drawing up the payment calendar, which establishes the internal priority of payments. Expense items that allow, if necessary, to shift the deadlines for paying bills, provide room for maneuver in the event of a temporary lack of funds.

The priority of payments in a given company is determined according to the current execution of the monthly cash flow budget, in which payments are tied to the corresponding receipts. This takes into account the terms of settlements under contracts and legal requirements regarding deadlines for paying taxes (for example, VAT).

In addition, senior management has the authority to change the order of payments. For example, a financial manager can put payment in the “first” priority, but must definitely determine from what sources (including additional) it will be made or in exchange for what payment it can be made without compromising the financial stability of the enterprise.

The main purpose of the payment calendar is to create a cash flow schedule for the next period (from several working days to one month) in such a way as to guarantee the payment of all necessary payments, minimize excess cash in accounts and avoid cash gaps.

The payment calendar may have a different presentation depending on the specifics of the business and the preferences of the relevant employees. However, it must necessarily contain data on inflows and outflows, as well as planned cash balances, usually broken down by day and their sources.

When creating a monthly payment calendar, you will need to model the distribution of planned cash flows by week and day. Understanding the distribution of expenses over time will help to identify the most risky moments from the point of view of cash gaps and take measures to redistribute the burden of payments, for example, spreading the payment of wages and transfers of taxes to the budget into different weeks, and using a loan on time.

The payment calendar is compiled on the basis of payment requests submitted and approved in accordance with the company's payment regulations. All applications are registered in a register, which reflects the necessary information about the approval process and payment for each of them.

The register may contain other analytical information necessary for the operational management of payments, for example, the name of the financial responsibility center to which the declared payment relates, the payment currency and the corresponding exchange rate to the budgeting currency, the name of the legal entity on whose behalf the payment will be made, the available limit for the item payment.

The main document determining the amount and structure of payments in the current period is the balance of payments of the enterprise. It is formed for each calendar month by the planning department on the basis of data provided by the relevant services on the planned volumes and conditions of product sales, purchases of raw materials and supplies, the volumes of main and auxiliary production, the wage fund, the calculation of taxes, etc. The balance of payments includes both the amounts of priority payments and payments related to the second priority

BDDS consists of revenue and expenditure parts, and the possibility of financing key expenditure items is linked to the implementation of the plan for collecting funds from income items. The planned BDDS is formed by the corporate finance department and communicated to the company's branches before the start of the planned period (quarter broken down by month). The execution of the BDDS is controlled by the Treasury Department, to whose regional offices each branch of the company is “linked”. Due to direct subordination to the management apparatus, this control body does not depend on the management of regional branches, which almost completely eliminates the influence of the “human factor”.

The Treasury Department monitors the execution of the BDDS and identifies the reasons for deviations, and also pre-analyzes each payment request for compliance with budgets. In addition, bank account agreements have been concluded between the enterprise and the banks servicing the enterprise's accounts, which provide for the impossibility of the bank accepting a payment order without its prior acceptance by the regional treasurer.

Automation of financial management business processes

To support operational cash flow management, automation of relevant business processes will be required. The selected software should allow:

• - create electronic accounting documents of the payment system (for example, requests for payment);
• - generate electronic reporting necessary to control the execution of payments, compliance with payment system regulations, cash flow budgets, for example, a payment calendar;
• - implement support for control and approval procedures (budgets, requests for payment, etc.). For example, applications that are not accepted by the head of the corresponding financial center and applications for payment are not visible to other participants in the business process, but as soon as the application is accepted, it is automatically sent for consideration to the financial manager;
• - differentiate access rights to financial information for different levels of responsibility in the company. For example, the head of the Central Federal District sees in the system only applications in his business area.

Until now, quite a lot of enterprises use Excel and other non-core programs to automate business processes for managing cash flow in an enterprise, but this method has a number of significant disadvantages: low efficiency in reflecting information and generating reports, vulnerability to failures, and the problem of double data entry. Currently, more and more companies are inclined to choose specialized software; for example, solutions based on programs from the 1C family are quite popular.

The automated budget accounting system used in the company, which implements the expense management function, allows you to solve two main problems at once. On the one hand, applications are automatically monitored for compliance with budget limits, on the other hand, approved applications form actual data on the execution of the company’s budget and operating plan.

Ideally, an enterprise's cash flow management system should be integrated into the enterprise's computer information system. Unfortunately, in enterprises, Excel was mainly used for these purposes. This in itself did not prevent us from systematically planning and controlling receipts and payments, and generating regular (daily, weekly and monthly) treasury reporting with a turnover of about 200-250 million tenge per month. However, this approach requires a significant amount of time to update and process data.

Automation of the cash management process significantly increases the speed and quality of management decision-making. We have implemented this process in Excel and, it should be noted that there are no problems with use. Formats and regulations for filling out tables were created gradually based on the needs of interested users. Currently, in parallel with the use of Excel, we are developing an enterprise cash flow management system based on 1C:Enterprise, in which we are trying to take into account all the developments in cash management using spreadsheets.

Some companies use email-based software that allows participants to work in the process regardless of their location. This is very convenient if you interact with 14 branches in three time zones. At the same time, if a person goes on vacation, it is enough to forward his mail to a deputy so that he can perform the functions temporarily assigned to him in the payment system.

In conclusion, I would like to emphasize that when financial management business processes are defined and optimized, and the corresponding regulations are developed and approved, the most difficult part begins - their implementation in the daily practice of the company. Transferring the correct payment system from paper to practice is the most labor-intensive. In particular, it can be difficult to eradicate unscheduled payments, for example payments that are typical and predictable, but for some reason are not planned, as well as payments initiated in violation of internal rules.

Practice shows that if more than 5% of payments in a company are unscheduled or are in violation of the internal procedure for making payments, then most likely this indicates that internal business processes for managing the company’s cash flow are not well-established, incorrect internal regulations for making payments or problems with financial discipline.

Of course, there are minor difficulties with personnel when implementing a cash flow management system. They are caused mainly by changes in the order of decision-making. If, in the process of developing regulations, you consult with employees, regardless of position, on how to do better, then most likely there will be no resistance. And to overcome conscious resistance, especially caused by selfish interests, the financial director must have enough “administrative resources.”

When implementing an enterprise cash flow management system, at first, conflicts arose with line services, which found it quite difficult to evaluate its benefits. Having secured the support of management, the financial service carried out constant explanatory work with colleagues, thanks to which the situation was changed. Within a couple of months, even ardent opponents admitted that after the launch of the system, the predictability and speed of payment of applications increased, which had a positive impact on relationships with counterparties.

It should be noted that cash flow management will be effective if all employees comply with internal regulations. If the company continues to have a situation where, for example, the CEO or owner can spend money in circumvention of internal regulations (for example, on entertainment expenses or as a withdrawal of capital from the company), then the CFO will not be able to fulfill the obligations to ensure timely payment of requests , filed in accordance with the regulations. Conversely, properly organized payment business processes allow the CFO to ensure that all requested payments will be made on time.

For a company that has several regional branches, you can implement the following model of business processes for managing the enterprise's cash flow. The payment initiator prepares a paper application in which he indicates the payment parameters: counterparty, term, account number, budget classifier item, etc.

The application, signed by the owner of the budget, is transferred to the financial department and entered into the accounting system as the “Request for Payment” document. In the company's branches, the application is entered by an employee of the financial department.

The accounting system, which manages the cash flow of the enterprise, is integrated with the inventory accounting system, which allows you to automatically generate requests for payment for goods and materials based on invoice data.

All entered applications receive the “new” status, which allows them to be considered, but does not provide the opportunity to make a payment. The application has a planned payment date. Next, it must go through two stages: budget control and setting up for payment.

At the first stage, the employee responsible for budget control checks the application's compliance with the limit established in the budget. If the application does not pass budget control, then it acquires the status of “insufficient limit” and requires additional approval and identification of funding sources.

The next stage is consideration of the application by the treasury and placing it on the payment schedule. To do this, it is assigned the status “for payment”. This can be done either manually or automatically. The treasury officer may reject the application or suspend it and assign it the appropriate status if he has doubts about the correctness of the payment. Based on applications that have been assigned the “payable” status, a payment schedule for the coming week is drawn up and approved by the financial director. When reviewing the payment schedule, cash gaps may be identified. In this situation, the responsible employee decides on the possibility of transferring individual applications to another date. Payments are made through the “bank-client” system and only on the basis of an application with the status “For payment”. In branches where it is not possible to organize automatic uploading of payment orders into the bank-client system, control of application execution is carried out at the level of statement posting: all applications are received in the system in which accounting is maintained, and when posting statements, payments must be compared with applications for which the payment was made. If the payment is not matched or made without a request, it will not be possible to post the statement in the accounting system. The Treasury, using this information, can analyze all payments made by the company. Budget owners have access to applications within their CFO and can quickly track changes in the status of their application.

The cash flow budget (CFB) is one of the main financial budgeting tools, originally intended to manage the solvency and liquidity of an enterprise. After all, a modern company should under no circumstances allow a financial deficit to arise. It is also necessary to ensure that there is no unused surplus of money supply, since funds must always work, bringing profit to the organization through successful financial transactions.

When consolidating the BDDS, it is necessary to create such regulations that would allow achieving the greatest possible certainty and accuracy of payments and receipts of funds. First of all, this is important for enterprises experiencing liquidity problems and lack of finance.

Budget regulations are a set of internal documents and orders of the company that describe the budget process.

At many domestic enterprises, budget regulations actually replace an order, which fixes the deadlines for the creation, approval and analysis of budget documentation, which uses a set of templates for these documents. Other rules governing the budget process are often negotiated orally.

Modern business conditions require that each company has its own cash flow budget, and also created BDDS regulations. In addition, the work requires detailing the movement of cash flows by period with an accuracy of one day. This tool is necessary for daily operational management of financial resources.

Features of the cash flow budget

Automation solution:

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ITAN company specialists have automated cash management in the Aktion media group. As a result of the “Standard Project,” the following business processes for cash management were automated: 1. Setting budget limits for the Central Federal District, budget items and projects; 2. Formation, budget control and electronic approval of applications for payments; 3. Formation of a register of payments; 4. Postro

Anyone interested in practical issues related to budgeting and management accounting can ask me any questions on this topic. I promise that all requests will not go unanswered.

Once, participants in my seminars on management accounting and budgeting (two people from the same holding) asked me to give their comments and suggestions for finalizing the draft BDDS regulations that they had recently prepared.

Obviously, this appeal relates to the second case, because it requires me to do some work.

It should be explained that I was approached by two heads of economic departments of two companies belonging to the same holding, in which work was underway to establish budgeting, but unfortunately there was no necessary support from management. True, they were allowed to undergo training at my seminars.

As you know, it is very difficult to set up budgeting and management accounting without appropriate support from management. So I decided to help them for free, although I usually do this kind of work only on a paid basis.

They sent me eight files for evaluation: the regulations themselves and seven appendices.

Below I give as an example the cover letter for the results of the analysis of the BDDS regulations, as well as the analysis itself. Naturally, all the real names of the companies of this holding have been changed here.

Covering letter to the results of the analysis of the BDDS regulations

I carefully studied all the files that you sent me.

Unfortunately, I cannot conduct a full examination, because... I don't know the company's business processes. I don't even have an organizational chart.

For example, regarding Appendix 7 (Procedure for creating a cash flow budget in terms of planning payments for orders), it is very difficult for me to make any specific comments for the same reason.

In general, I have some comments and also questions. Perhaps all the questions are related precisely to the fact that I did not conduct diagnostics and do not know the company.

Maybe some of my questions will lead you to some new thoughts (but I can’t give a guarantee).

I believe that main note You already know this after you attended my seminars on management accounting and budgeting.

The point is that it is planned to create an initially defective system.

I said at the seminar that the first version may not be very detailed, but the budgeting system should be complete.

For now, attention is focused only on one aspect of the financial and economic condition of the company - namely, financial flows.

I said at the seminar that in the logical chain of planning, money is always at the end. You need to start with the financial result (elements of the financial statement). And then move on to resources and sources of their financing (elements of the BBL) and financial flows (elements of the cash flow budget).

Moreover, it is simply impossible to effectively analyze the execution of one cash flow budget without the other two aspects.

Or do you have regulations for a full-fledged budgeting system, but you only sent me the BDDS?

I placed the rest of my comments and questions directly in the text of the file with the regulations, highlighting them in blue and italics . I also made appropriate comments in separate files for each application.

I hope this helps you somehow.

If you have any questions, please contact us.

Regulations for the preparation and control of execution of the cash flow budget (draft)

1. Purpose (Purpose):

These regulations for the preparation and control of the execution of the monthly cash flow budget (hereinafter referred to as the Regulations) establish the procedure for the distribution of functions and mechanisms of internal interaction between process participants in the preparation, approval and control of the execution of the monthly cash flow budget.

Let me remind you that many decisions made when approving budgets can have consequences not only in the next month, but also later. Therefore, when planning for the next month, the consequences of many decisions may simply not be seen. And when the company reaches them, nothing can be fixed, because... the decision had already been made earlier.

The Company's monthly cash flow budget (hereinafter referred to as the BDFS) is formed with the aim of planning the maximum permissible volume within which the Company's divisions can be financed, by clarifying the plan of receipts and payments for the month and subsequent monitoring of the volume of actual financing.

These Regulations come into force from the date of its approval.

2. General provisions:

2.1. Application area.

These Regulations determine the procedure for actions performed during the formation, approval, and control of the execution of the cash flow budget, their sequence, the powers of the participants in the process and their responsibilities.

The scope of application of these Regulations in all financial responsibility centers and budgetary units of the Company.

2.2. Terms, definitions and abbreviations.

For the purposes of this document, the following terms and abbreviations are defined:

We talked about this at the seminar.

Appendix 4

It contains a classification of cash flow items (a list of 160 items).

It is difficult for me to evaluate this classifier for its completeness, as well as the required level of detail because... I repeat once again that I do not know the company’s business processes, as well as the amounts that go through each item (to understand where it makes sense to reduce things and where not).

In general, I can note that the structure of the classifier itself fully meets the requirements, because there is a breakdown of receipts and payments for three types of activities (core, investment and financial).

There are only a few points.

1. I don’t understand how article O.1.3.8 “Exchange rate difference+” and O.2.15.18 “Exchange rate difference-” got here. When exchange rate differences arise, does this have anything to do with cash flow? This affects income and expenses, but what does financial flow have to do with it? Maybe something else was meant here?

2. I don’t understand article O.2.3.3 “Finished garments.” If your company has its own sewing production, then payments are made for materials, labor, electricity, etc. Perhaps my question is simply related to the fact that I do not know the business processes and scheme of inventory and financial flows of your company.

3. It is not clear what O.1.3.6 “Receipts from consulting (including outsourced conditions)” is?

4. It is not clear what is the difference between article O.2.10.3 “Consulting services (including outsourced services)” and O.2.10.5 “Consulting services”?

5. What is O.1.3.7 “Interest for the use of credits and borrowings +” and I.1.2 “Interest received” and why are they classified as core and investment activities, respectively?

6. O.1.3.5 “Receipts from founders” and O.2.15.14 “Payments to founders” relate not to the main activity, but to financial activities.

Appendix 5

It contains the application plan form for the Central Federal District.

It is very difficult (if not impossible) to draw up such an application in a high-quality manner without a full-fledged budgeting system, when everything is planned, and not just one aspect (money in the cash flow budget).

We talked about this many times at the seminar.

By the way, we also looked at examples of applications in which all aspects were worked out, not just money. See, for example, slides No. 11-12 in the third part of the seminar.

Appendix 6

It contains the budget form for the Budget Unit.

I repeat once again that this document cannot be compiled qualitatively for the same reason that was already mentioned in the analysis of Appendix 5, because it will be consolidated from requests from departments that are included in the corresponding budget unit.

And if the quality of the initial information is low, then the consolidated result will be the same.

Perhaps, again, due to the fact that I did not diagnose the company and do not know the business processes, it is not very clear to me what a type of activity is and how it is possible to allocate cash balances by type of activity.

In fact, I have doubts about how to calculate cash balances by budget units. Although if these are separate companies, then of course it is possible.

Appendix 7

It contains the procedure for creating a cash flow budget in terms of planning payments for orders.

I already wrote in the cover letter that this app is the hardest for me to evaluate for the same reason (I don't know the company).

Just one moment.

P.2.1. Why does foreign economic activity deal with facts? Perhaps this question of mine is related to my misunderstanding of why the table in the fourth section of the regulations says that the foreign trade department is responsible for preparing the fact.

Shortly after sending the results of the evaluation of the draft BDDS regulations, I received this letter.

Hello, Alexander!

Thanks a lot Thank you for taking the time and reviewing my regulations, making your comments and observations to them.

Yes, of course, I understand that the regulations do not cover all aspects of budgeting, but in the current conditions in our company, the analysis of the generated BDR and BBL is not yet possible due to the fact that we, having drawn up the BDR, will not be able to even compare the plan with the fact, since management We have not yet registered. But of course I will try to take into account all your recommendations and comments and finalize the regulations.

Sincerely,
Head of Economic Department

1.1. Purpose of the document

The regulations for the process of executing the payment calendar contain the procedure and requirements for the actions of company employees when making certain payments (payments) in order to streamline the payments made, as well as increase the efficiency of using the company’s funds.

2. Conditions and restrictions

2.1. Payment calendar execution process

Work on executing the payment calendar begins with receiving:

an employee of the company invoices from a counterparty;

any other document-basis on the basis of which funds will be written off or issued.

2.2. Restrictions

2.2.1. The payment register must be completed by 6:00 pm on the day preceding payment.

2.2.2. If, during the process, an accountant working with a bank is faced with the need to replace an account or in the event of any unforeseen situations when making payments, he informs the head of the financial department, who makes a decision on how to resolve the current situation.

3. Procedure requirements

3.1. Generating a payment request

3.1.1. A company employee generates a request to make a payment or issue funds through the cash register if there is a need to pay for services, inventory items and other expenses.

3.1.2. The employee's responsibilities include:

checking the compliance of the issued invoice with the agreement, payment plan, etc., if necessary, he clarifies this information with the counterparty or commercial director;

checking whether the required payment has already been paid earlier, if necessary, contacting the counterparty and clarifying information about deliveries and payments;

transfer of an invoice, order or other documents, indicating the numbers of approved applications and the amounts actually paid for them, to the commercial director for further approval.

3.1.3. The payment request must be prepared and sent for approval to the commercial director no later than 18-00, at least 2 days before the required payment is made.

3.2. Checking the possibility of making a payment

3.2.1. The commercial director, after receiving a payment request from a company employee, checks the possibility of making the payment. In this case, the commercial director must:

check whether the invoice was paid earlier, the estimated payment terms, delivery dates, and, if necessary, clarify this information with the treasury or accounting department;

identify the payment in the payment calendar, as well as the cost items for which the required funds are planned;

compare the employee's reported expenses in the invoice with the expenses in the approved payment plan;

check the presence and quantity of accounts payable to the supplier, delivery terms, etc. Based on the verification, assess the priority of the application, the possibility of its approval or transfer;

check the correctness of assignment of certain requests to budget items. If necessary, make adjustments or give appropriate instructions to the employee who initiated the application;

if there are no objections regarding the amount and timing of payment, endorse the payment application, indicating the date of acceptance, and return it to the responsible employee for further transfer to the company treasury.

3.2.2. The application for payment must be checked by the commercial director and sent to the treasury no later than 14-00, 1 day before the required payment is made.

3.3. Coordination of off-budget payments

3.3.1. The CFO will reconcile all payment requests that were not initially included in the company's payment plan after receiving requests for these payments from company employees.

3.3.2. When approving a payment request, the CFO may:

clarify information about the need for payment from the commercial director and heads of relevant departments;

decide on the possibility of making an off-budget payment;

postpone other payments to the next day to make an off-budget payment, if necessary, coordinate this decision with the general director of the company.

3.4. Creating a register of payments for the next day

3.4.1. Treasury employees check payment requests received from company employees and create a register of payments for the next day, daily, based on the requests submitted, the ten-day payment plan and off-budget payments approved by the financial director.

3.4.2. In this case, treasury employees are obliged to:

check the application for compliance with the budget and availability of a commercial director visa;

compare the amount specified in the payment request with the expenses in the approved payment plan, taking into account the cash balance for the corresponding expense item;

check whether these invoices, orders and applications have been paid previously. If these payments have already been made, clarify the need for a repeat payment with the commercial director and financial director of the company;

if the specified expenses are taken into account in the ten-day payment plan, have not been paid previously and there are enough planned funds for them, endorse the application and indicate the date on the reverse side;

make copies of endorsed documents and hand them over to the employee; the original documents remain in the treasury.

3.4.3. 1 day before the date on which the payment register is formed, treasury employees:

form a register of company payments for the next day, which must include all accepted applications for payment, including applications for extra-budgetary payments approved by the financial director. If extra-budgetary payments are included in the register, they must be noted in a special field in the payment register and payment calendar “outside the plan”;

information on invoices and payment orders must be entered into the payments register, broken down by bank and payment purpose.

3.4.4. On the next day, on which the payment register is formed, treasury employees:

check the balance of funds in the company’s current accounts in the “Bank-Client” system;

indicate in the payment register information on the amount of cash balances on the company's current accounts for each bank separately, indicating the currencies;

save the generated payment register (payment register project) in a special folder and send a link to the generated register to the financial director by e-mail.

3.5. Distribution of payments

3.5.1. The financial director distributes payments for the day after receiving the payment register (payment register draft) from the treasury staff.

3.5.2. When distributing payments for the day, the financial director performs the following main actions:

gets acquainted with information about the balance of funds on the company’s current accounts and the register of payments for the day;

on the basis of a subjective opinion, distributes payments specified in the payment register among banks (if possible, taking into account the priorities established by the heads of departments and the commercial director);

saves the approved register with distributed payments in a special folder.

3.6. Making payments by bank

3.6.1. Treasury employees pay invoices and orders after receiving a message from the financial director about the readiness of the payment register.

3.6.2. In this case, treasury employees perform the following actions:

make a copy of the payment register approved by the financial director on your local disk;

sign accounts with the chief accountant;

carry out payment of bills and orders in accordance with the approved register of payments using the “Bank-Client” system;

indicate the fact of making a particular payment in their copy of the payment register;

invoices that have not been paid for one reason or another are stored separately for further inclusion in the payment register.

3.6.3. Payments must be made before the end of the current banking day.

3.6.4. If during the procedure the treasurer is faced with a situation where it is necessary to replace the account, he informs the employee who initiated the payment.

3.6.5. If the treasurer encounters any problems while paying the invoice (payment does not go through, there is not enough DS, etc.), he informs the head of the financial department, who makes a decision on how to resolve the current situation.

3.6.6. The treasurer may return the invoice for re-issuance due to the payment recipient's failure to fulfill its obligations under the agreement or due to other violations.

3.7. Accounting for payments made and notifying managers

3.7.1. The treasury employee notifies department heads about paid and unpaid invoices and orders the next day after receiving the payment register indicating the fact of payment:

in the form of an email, informs all department heads about what of their requests was paid for the past day and what was not (indicating the request number, payment date, amount, account number);

summarizes the fact of payments according to the register of payments for the past day. That is, based on its copy of the payment register, it enters the fact of payment into the initially approved payment register for the past day.

4. Performance control

The implementation of these regulations is monitored by the head of the company’s financial department.

If violations are detected in compliance with the requirements of the regulations, the head of the financial department conducts an analysis of the situation, as a result of which he can make the following decisions:

if the violation is related to the violator’s insufficient knowledge and understanding of the requirements of this regulation, carries out explanatory work with him;

if the violation is related to the employee’s dishonest performance of his official duties, he has the right to impose penalties in accordance with the established procedure (see the company’s motivation regulations);

if the violation is systematic, develops changes to this regulation.