When designing a result-oriented budget, it is important to take into account the
significant differences in the function of the target budget, and the usual item budget.
The basic principles of budgeting are shown in Fig. 2.
Figure 2. Principles of result-oriented budgeting
Source: authors’ development
When designing a results-based budget, it is important to take into account the
significant differences in the function of the results-oriented budget managers and the
usual line-item budget [5, p.12].
The main principle of results-based budgeting in this way is based on the
increased responsibility of the company's divisions for personal results comparable
with the increase of their independence in matters of budget execution.
Thus, result-oriented budgeting assumes sufficient freedom for the budget
recipients in the choice of means to achieve the goals, while at the same time imposes
on them responsibility for their own effectiveness and effectiveness of their
commercial functions. For example, in the article-by-article model of budgeting, the
efficiency indicator can be “budget saving”, and in “ROB” - the budget administrator
can choose what to do: maximize results in comparison with costs or vice versa
minimize them.
The second feature of “ROB” is the growing powers of the divisions to
redistribute available economic resources for different instruments.
The third principle of performance-oriented budgeting is the change in the
budgetary control system. In fact, the control of the targeted use of money is abolished,
and a system for controlling the correspondence between costs and results comes to
replace.
The final principle of “BOR” in commercial companies is the principle of
openness of information. The company’s budget system, focused on the result, is
interested in multi-level control of various involved persons. Ultimately, this provides
an increase in the effectiveness of the entire process as a whole.
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