Budgets in Manufacturing Companies
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Budgets in manufacturing companies
Text adapted by Hugues Boisvert, from chapter 11 of the book La comptabilité de management, prise de decision et contrôle, 3e edition, ERPI, 2004, p. 278-292, written by Hugues BOISVERT, Claude laurin and Alexander mersereau (HEC Montreal).
Table of contents
1. Budgets
2. Budgetary styles
3. The budget process in a manufacturing company
4. Comprehensive example of a budgetary process of a manufacturing company
5. Budgetary management challenge
6. Objectives
budgets
1 The origin of budget
The word budget arises from the French “bougette”[1], a small leather case used in France by finance officials to carry state plans. Eventually the term came to refer to the plans themselves although these early documents did not resemble budgets as we know them today. Rather, budgets as management tools first appeared in government. In the United States, budgets were introduced at the municipal level in the late 1800’s to limit the ability of the state to tax and spend and by 1919, forty four US states had adopted some form of state budget. The first US national budget was transmitted to Congress in 1921. Thus, the initial role of budgeting was to control spending in the public sector.
It was not until the 1920’s however that budgeting evolved as a control tool for managing business enterprises. This occurred first in the United States mainly due to the influence of Frederick Taylor and the Scientific Management movement but also thanks to the demonstrated efficacy of public budgeting.
Budget innovation in the private sector spread quickly to a large variety of industries, including oil, railroads, banks, newspapers, construction, metal working and department stores. A survey conducted in 1930 among 294 large US industrial companies[2] revealed that 55% had budgets of
Budgets in manufacturing companies
Text adapted by Hugues Boisvert, from chapter 11 of the book La comptabilité de management, prise de decision et contrôle, 3e edition, ERPI, 2004, p. 278-292, written by Hugues BOISVERT, Claude laurin and Alexander mersereau (HEC Montreal).
Table of contents
1. Budgets
2. Budgetary styles
3. The budget process in a manufacturing company
4. Comprehensive example of a budgetary process of a manufacturing company
5. Budgetary management challenge
6. Objectives
budgets
1 The origin of budget
The word budget arises from the French “bougette”[1], a small leather case used in France by finance officials to carry state plans. Eventually the term came to refer to the plans themselves although these early documents did not resemble budgets as we know them today. Rather, budgets as management tools first appeared in government. In the United States, budgets were introduced at the municipal level in the late 1800’s to limit the ability of the state to tax and spend and by 1919, forty four US states had adopted some form of state budget. The first US national budget was transmitted to Congress in 1921. Thus, the initial role of budgeting was to control spending in the public sector.
It was not until the 1920’s however that budgeting evolved as a control tool for managing business enterprises. This occurred first in the United States mainly due to the influence of Frederick Taylor and the Scientific Management movement but also thanks to the demonstrated efficacy of public budgeting.
Budget innovation in the private sector spread quickly to a large variety of industries, including oil, railroads, banks, newspapers, construction, metal working and department stores. A survey conducted in 1930 among 294 large US industrial companies[2] revealed that 55% had budgets of