Cost Reduction & Avoidance Budgeting

Here, budgeting is to be understood as a process that encompasses all activities within the framework of the creation, approval, implementation and adjustment of budgets. As an original controlling instrument, budgeting is an important management coordination tool that requires coordination and mutual information. Based on the characteristic of the planning levels, a distinction is made between operational and strategic budgeting.

 

Operational budgeting involves the preparation, specification and control of operational budgets. It thus comprises the complete summary of the expected and/or desired development of the company in terms of quantity and value in the future planning period (usually one year).

 

Strategic budgeting is based on plans for securing the company's long-term existence, which are drawn up per area of responsibility for the planning period. The planned goals and measures are to be converted completely into value-based figures - in relation to a longer-term period of three, five or ten years.