Budgeting systems as management tool for European small and medium sized businesses

Index

1. Introduction

2. Business management in medium sized businesses
2.1. Business management: The term
2.2. The medium sized business

3. Budgeting systems as a management tool
3.1. Construction of a management system
3.2. Basics of budgeting
3.3 Construction and organization of budgeting systems

4. Functional areas of business management of medium sized businesses
4.1. The area of procurement
4.2. The area of production
4.3. The area of outlet (turnover)

5. Conception of a budgeting system for medium sized businesses

6. Summary

Literature

1. Introduction

Nowadays’ enterprises are subject to continual change; internal and external changes hitting the enterprise require a large amount of flexibility to be able to keep their market position in the long run. Past experience has shown that especially small and medium sized businesses had not prepared themselves well enough for the turbulent and discontinuous environmental changes. Looking at globalization and the present economical recession, the pressure on small and medium sized businesses rises continually.

In the Federal Republic of Germany, the entirety of medium sized businesses play a vital role with respect to macroeconomics. The few empirical examinations on the status quo concerning the application of business-management methods, in particular application of planning systems in small and medium sized businesses make it clear that systematic planning and application of business-management methods in those enterprises is insufficient. In particular enterprises with a turnover of up to 10 m. Euro have shown considerable deficits regarding the application of business-management methods used for running an enterprise.

Budgeting counts as one of the main tools for finance- and success-oriented business management. Papers on business economics generally set out the importance of and necessity of budgeting, in order to assure further existence of the enterprise. Up to now, there empirical insights into the drawing up of budgeting systems for small and medium sized businesses are rare; those examinations there are, normally have large enterprises as a target. Questions regarding the development of medium sized budgeting systems remain more or less unanswered. It is, therefore, the goal of this paper to offer some suggestions regarding the construction of effective budgeting systems for medium sized businesses on the basis of the existing theoretical know-how.

Following the above mentioned course, there shall be a general code of practice for the development of budgeting systems, based on the type of enterprise concerned. With reference to the existing theoretical findings, a budgeting system that can be used by medium sized businesses shall be constructed. Not only shall possible weaknesses be pointed out, but suggestions with respect to improvements shall be offered. In this conceptual part, structure, contents and interdependencies of budgeting systems for medium sized businesses shall be introduced. It is the purpose of this work to develop a practical solution for controlling the organisational areas of medium sized businesses. In order to get there, partial company budgeting systems like, i.e., sales budgets, production budgets, acquisition- and administration-budgets, same as financial and success-budgets, shall be explained and any structural interdependencies shall be depicted.

When compared to large enterprises, medium sized businesses show clear shortfalls when it comes to the development of budgeting systems. By using properly developed systems, chances will arise for a qualified business management of companies of the size concerned.

2. Business management in medium sized businesses

2.1. Business management: The term

Literature on economics gives different definitions of the term of business management. There is no consistent classification of the often synomymously used terms of company management, management, business management and corporate management. Interpretations range from the idea that business economics is to be seen as business management based on the majority of scholars’ views^[1], up to the idea that there is “no scientific doctrine with respect to business management"^[2]. The bigger part of literature has recently settled somewhere in between the above extremes; numerous business-economics-doctrine related questions have been classified as management related problems^[3], or partial aspects of business economics and company management are brought together.

Parallel to the development of business economics, the issue of company management becomes more and more important. As the topic of business economics has ist focus on functional issues, company management plays an inferior role which, if at all, may be mentioned as part of the production factor “work”. Factor-oriented business economics pictures company management as an independent area by way of an “anticipated factor”. In decision-oriented business economics, a “decision” is central task of the company management; additionally, it will produce a differenciate view of entrepreneurial institutions and separate the different company levels. System-oriented business economics offers new findings in particular on the processual part of company management^[4].

The decomposition of the term „company management“ leads to the components of "company" and "management". Business economics defines enterprises as artificially created, highly complex, open, social-technical, dynamic and purpose-oriented systems^[5]. Hence, enterprises are no natural systems, running self-monitored from the beginning on, based on the respective cybernetic model, but they need supervision/management with respect to the planned (entrepreneurial-) goals. Management here means "the goal-oriented influencing of the behaviour of individual members as well as the whole unit of organisation "^[6].

For better theoretical insight, company management may be looked at from different angles, however, it needs to be taken into account that the single levels of consideration can only give an incomplete description of company management. The major part of recent business-economics-definitions of management have their focus on multi-dimensionality and the multi-levels of company management in an integrated conceptual design^[7]. Beyer, for example, combines processual, functional and institutional dimensions of company management and defines those as "the entity of integrated person- or issue-related decision processes, permeated or ovelayed by, the formal decision functions including the elements of planning, organization and control, as those would present themselves in the decisional fields of the enterprise (business strategy, human resources management, also financial management, project 1,2,3 e.t.c.), in which aspects of structure, processes and functions are merging"^[8].

In this connection, Rühli demands the integration of institutional, functional and instrumental aspects of company management with respect to elements of decision making (planning and decisions) as well as pushing through of will (command and control)^[9].

Management as an institution^[10] refers to a circle of individuals holding the rights to decide or command in an enterprise, and whose tasks are of a dispositive nature, thereby controlling the entire enterprise, whereas, according to the respective hierarchic placement in the enterprise, generally, differences between “management staff” can be made not only between owners and shareholders, but, in medium sized businesses, also between upper, medium and lower management levels of hired management staff^[11]. Small and medium sized businesses typically have proprietorship and management combined in one person (Eigentumsmanagement – unknown in English, suggestion: proprietary management), also the put the entrepreneur himself at a central point of company management. The following pictures show the five management levels typical for medium sized businesses:

Abbildung in dieser Leseprobe nicht enthalten.

Management levels of medium sized businesses^[12]

A separation of hired management staff from the entrepreneur or the shareholders is necessary, as the managerial tasks of the two groups and their personal commitment will be completely different with medium sized businesses.

With management as a function, we find the process of a goal-oriented command and design of enterprise-related dealings, which defines itself as a process of decision-making and –enforcement, via taking on the respective responsibility and accentuating the individuals taking part in the managerial processes; it can be divided up into the phases of the management process^[13], i.e. into planning, command, and control. Management functions therefore contain issue-related as well as individual-related managerial tasks.

With the processual view of company management, planning, command and control make up for the core function of this management cycle, whereas each of the management functions will hold further task areas (fields of activity). Planning and control primarily describe issue-related management tasks, looking for content-related problem solutions regarding managerial tasks of the company management; Command, however, has its focus on individual-related components or the phase of enforcement of the management process^[14].

2.2. The medium sized business

The term „medium sized business“^[15], marking smaller and medium sized enterprises, which, according to the branch of economy, can be defined differently, with respect to quantity and quality, is not being defined consistently in business-economical literature or practice^[16].

So, the Federal Government^[17] counts as a medium sized such enterprises that, as a rule, do not finance themselves via the organized capital market and which are lead by self-employed, working owners, the latter also bearing the general business risks. A differentiated view gives the following picture; Pfohl and others differentiate, amongst other factors, between turnover and number of staff, within each industry sector.

Abbildung in dieser Leseprobe nicht enthalten.

Example for a branch-dependent definition of classes, stating the parameters of "number of staff " and "employees”^[18]

This paper does not aim to give a new definition of small and medium sized businesses. Medium sized businesses shall be defined with reference to the above mentioned proposals. Resulting therefrom, we shall receive a general but complete classification which, for practical reasons, can also be used for the rest of this paper. A branch-relevant classification, further differentiation as well as a sub-division into small und medium sized businesses shall be given in the respective paragraphs of this paper.

3. Budgeting systems as a management tool

3.1. Construction of a management system

The business-objective-related control of the functional areas of an enterprise as part of a concept for the management of medium sized businesses will, in order to reach the business-objectives, develop parameters of action that co-ordinate the different task-areas and point out the organizational structure with its responsibilities and decision-making-fields. The implementation of a goal-oriented management system into the organizational structure of medium sized businesses must be ensured and the combination with a conceptual management design must be made clear.

In more detail, the following components of a management system^[19],

- company goal system,
- planning- and control system,
- organizing system,
- information- and communication system,
- in-house human resources management system,

with all occurring interdependencies will need to be harmonized with each other with respect to contents, processes and structure, so as to result in a basic design for a goal-oriented management system. This is a vital requirement for the functionality of a management system, also for medium sized businesses.

As an example, it will need to be checked in how far amendments to the formerly used hierarchical-structural concept of small and medium sized businesses are necessary, and which are the branch-typical points that need to be taken into account.

3.2. Basics of budgeting

The terms "budget", "budget systems", "budgeting“ or "budgeting systems" are subject to different classification and meaning in literature. If we want to characterize the essence, meaning and statement of the above terms, we first need to define the essential characteristics budgets. At the same time, a delimitation concerning other management systems or. financial planning systems (i.e. finance-, cost- or revenue-plans) needs to be given, so as to be able to work out the specific characteristics of budgets and their classification as part of those systems.

In literature on business economics, the definition of the term is mainly done in two directions, namely on the basis of issue-related, and on the basis of behaviour- (individual)-related aspects^[20]. Only the more modern works are using a one-dimensional view of the budget-term, using only one of the two mentioned aspects, whereas here, budgets are seen as management-tools^[21].

To get to a final distinction concerning the several conceptual and functional views on budgets, budgeting, budget systems and budgeting systems, we shall, in the further course of this work, next to issue-related (with regard to contents) design-criteria also make reference to behavioural (social-emotional) criteria, however, as far as the historical development of the terms in concerned, without giving a detailed comparison of the different basic definitions^[22].

In the following, to a large extent, we can as a consensus in literature take the view that budgeting is "the actual method of creation of a budget and the practical application of that budget "^[23], as well as, in the broadest sense, a behaviour-influencing control of parts of an enterprise in the sense of a balanced, goal-oriented management, hence its defined determination is done in dependency on the conceptual establishment of the budget^[24].

[...]

^[1] Vgl. Ulrich, Hans: Die Unternehmung als produktives soziales System. Grundlagen einer allgemeinen Unternehmungslehre, Unternehmung und Unternehmungsführung, Bd. 1, S. 319. Die Begriffe "Betriebe", "Unternehmungen" und "Unternehmen" werden in dieser Arbeit synonym verwendet.

^[2] Gutenberg, Erich: Unternehmensführung. Organisation und Entscheidungen, S. 5 (Vorwort).

^[3] Vgl. stellvertretend hierfür Hopfenbeck, Waldemar: Allgemeine Betriebswirtschaftslehre und Managementlehre - Das Unternehmen im Spannungsfeld zwischen ökonomischen, sozialen und ökologischen Interessen.

^[4] Vgl. zu den Entwicklungsstufen der Betriebswirtschaftslehre im Zusammenhang mit der Be­handlung der Unternehmensführung Bestmann, Uwe (Hrsg.):Kompendium der Betriebswirtschaftslehre, S. 75; vgl. zu den verschiedenen Ansätzen der Unternehmensführung auch Thommen, Jean-Paul: Die Lehre der Unterneh­mensführung. Eine wissenschaftshistorische Betrachtung im deutschsprachigen Raum.

^[5] Vgl. zur systemorientierten Betriebswirtschaftslehre Ulrich, Hans: Die Unternehmung als produktives soziales System. Ein System wird allgemein definiert als eine Menge von Elementen, die zum Zwecke der Zielerreichung untereinander oder mit Elementen anderer Systeme in Beziehung stehen.

^[6] Bestmann, Uwe (Hrsg.): Kompendium der Betriebswirtschaftslehre, S. 80.

^[7] Vgl. zu den integrierten Ansätzen insbesondere Beyer, Horst-Tilo: Die Lehre der Unter­nehmensführung. Entwurf eines Forschungsprogramms, Betriebswirtschaftliche Schriften, Heft 45; Rühli, Edwin: Unternehmungsführung und Unterneh­menspolitik, Bd. I; Szyperski, Norbert: Unternehmungsfüh­rung als Objekt und Adressat der Betriebswirtschaftslehre, in: Wild, Jürgen (Hrsg.): Unternehmungsführung. Festschrift für E. Kosiol zu seinem 75. Geburts­tag, S. 3 - 38.

^[8] Beyer, Horst-Tilo: Die Lehre der Unternehmensführung, S. 169. (Struktur-, Prozess- und Funktionalaspekte beschreiben die grundsätzlichen Betrachtungsweisen der Unter­nehmensführung, die auch als Dimensionen bezeichnet werden.)

^[9] Vgl. Rühli, Edwin: Unternehmungsführung und Unternehmenspolitik, S. 27.

^[10] Bei Betrachtung der Unternehmensführung als Institution bzw. Organisation wird auch von struktureller Dimension der Unternehmensführung gesprochen.

^[11] Vgl. Steiner, Joachim/ Reske, Winfried: Aufgaben und Bedeutung von Führungspersonen in mittelständischen Betrieben - Ergebnisse einer empirischen Analyse -, in: In­stitut für Mittelstandsforschung (Hrsg.): Beiträge zur Mittelstandsforschung, Heft 36, S. 12.

^[12] Vgl. Steiner, Joachim/ Reske, Winfried: Zum Einsatz von Führungspersonal in mittelstän­dischen Betrieben - Ergebnisse einer empirischen Untersuchung -, in: Institut für Mittelstandsforschung (Hrsg.): Informationen zur Mittelstandsforschung, Nr. 30, S. 2.

^[13] Im betriebswirtschaftlichen Schrifttum existieren unterschiedlich weit differenzierte und unterschiedlich weit reichende Phasenschemata.

^[14] Die Mehrzahl der Literaturmeinungen stellt bei funktionaler Betrachtungsweise der Unternehmensführung eine sachliche und eine personenbezogene Betrachtungsweise der Unternehmensführung heraus, vgl. z.B. Hahn, Dietger: Führung und Führungsorga­nisation, in: ZfbF 1988, S. 112.

^[15] Die Begriffe "Mittelständisches Unternehmen", "kleine und mittlere Unternehmen" wer­den in dieser Arbeit synonym verwendet.

^[16] Eine umfassende Untersuchung zur Definition und zum Wesen mittelständischer Unterneh­men gibt Gantzel, Klaus-Jürgen: Wesen und Begriff der mittelständischen Unterneh­mung, in: Institut für Mittelstandsforschung (Hrsg.): Abhandlungen zur Mittel­standsforschung, Nr. 4.

^[17] Vgl. Bericht über Lage und Entwicklung der kleinen und mittleren Unternehmen. Mittel­standsbericht, Bundesdrucksache 7/5248.

^[18] Vgl. Pfohl, Hans-Christian (Hrsg.): Betriebswirt­schaftslehre der Mittel- und Kleinbetriebe, S. 10.

^[19] Vgl. Wild, Jürgen: Grundlagen der Unternehmungsplanung, S. 35.

^[20] Vgl. z.B. Schefenacker, Alfred R.: Führung durch Budgetvorgabe. Eine verhaltensorientierte Planungs- und Kontrollrechnung als Führungsinstrument, Diss., S. 2 - 3; Siegwart, Hans: Budgets als Führungsinstrument, in HWFü, Sp. 105 - 115, hier Sp. 112.

^[21] Vgl. Siegwart, Hans: Budgets als Führungsinstrument, Sp. 106.

^[22] Zur historischen Entwicklung des Budgetbegriffs vgl. ausführlich Jung, Hermann: Die Integration der Budgetierung in das System unternehmerischer Planung und Kontrolle - eine kontextbezogene empirische Untersuchung, Diss. , Stuttgart 1984, S. 18 - 25 und weitere dort aufgeführte Literatur. Definitionsgegenüberstellungen finden sich beispielsweise in Bamberger, Ingolf: Budgetierungsprozesse in Organisationen, Diss., S. 32 ff; Barth, Eberhard: Der Entwurf eines Budget-Simulationsmodells unter Berücksichtigung von Zielniveau- und Zielprioritätsänderungen, Diss., S. 22 - 29; Dober,W.: Die Begriffe Finanzplan und Budget, in: Die Unternehmung, 1967, S. 181 - 186.

^[23] Vgl. Heiser, Hermann C.: Budgetierung. Grundsätze und Praxis der betriebswirtschaftlichen Planung, S. 16.

^[24] Vgl. auch Grimmer, Herbert: Budgets als Führungsinstrument in der Unternehmung. Eine sach- und verhaltensorientierte Analyse. Diss, S.18; Jung, Hermann: Die Integration der Budgetierung in das System unternehmerischer Planung und Kontrolle, S. 18; Wild, Jürgen: Budgetierung, in: Management-Enzyklopädie, S. 325.