Why do we need BDR and BDS?

To control financial flows in the enterprise, management draws up different budgets and balances. These reports are supplemented by BDR and BDSDS. Behind the abbreviations is the budget for income and expenses, as well as the cash flow budget. The purpose of these reports is the same, but they are generated in different ways.

BDR and BDSDS - what is it?

The income budget contains information on the amount of planned profits in the next period. When it is formed, the cost of production, revenue from all types of activity, and profitability are taken into account. BDR is designed to distribute profits in a certain period.

The cash budget reflects the cash flows of the enterprise. That is, the report includes only those articles on which the movement of funds took place. A report is used to redistribute cash.

Differences between BDR and BDS

1. BDR contains information about planned profit, BDS contains the difference between incoming and outgoing cash flows.
2. The BDR is similar in structure to the income statement, and the BDS is similar to the statement of cash flows.
3. BDSDS, unlike BDR, includes only “monetary” items.

Report Structure

Let us consider in more detail what indicators are reflected in each of the reports. We will use the table for a better perception of information.

When forming budgets, the financial department most of all questions arises with taxes. Should VAT be included in the BDR? As practice shows, the amount of taxes does not affect the efficiency of the business as such. This is especially true for organizations that use this balance to manage the economic activity of production. Therefore, the amount of accrued taxes should be deduced from the report.

How does the BDR work?

The main principle of budgeting is to include in the report all indicators characterizing the activities of the organization. Only if the BDR and BDSD will contain all management budgets, we can talk about the integrity of the system. Moreover, these two reports complement each other.

The sales department is responsible not only for the quantity of products sold at a certain price, but also for the receipt of funds from customers. BDR does not contain information about debt, about payments. Using numbers from only one report, you cannot build an integrated budget model.

The manager is given the task of “sell at all costs,” and he quickly completes it. Management already calculates profits and accrues bonuses, but faces an unexpected problem - the company does not have money to buy raw materials for the next batch of goods, and the supplier does not provide a commodity loan. The manager sold the goods, and he was given an accrued bonus. That's just the money in fact has not yet arrived. Therefore, the rest of the managers were left without work.

This is the simplest example of illiterate financial management. The result of the work should be evaluated not only by the amount of profit, but also by the amount of funds returned. Then cash gaps will not occur. For this, it is necessary to form BDR and BDS.

How BDSD works

Sometimes the financial department is only BDS, forgetting about the charges. Managing the economy only on a cash basis is dangerous. Received is not yet earned money. Accrued profit is reflected in the BDR, and the fact of its receipt - in the BDS. They rarely coincide. Most often, an organization forms either a receivable (payment from a client) or a payable (advance) debt. Therefore, it is necessary to compile reports of BDR and BDSF at a time.

Many managers recognize income only at the time of receipt of funds, and expenses at the time of their use. But in this case, the debt is not displayed, an important part of management information is lost.

To clearly illustrate what errors cash management can lead to, we consider a simple example. Fitness club in September sells subscriptions for 3 months in advance. The entire fourth quarter serves customers, and at the end of the year arranges a similar promotion. Since 90% of sales are made to individuals, there is no need to talk about receivables. But the organization has customer service obligations. All this is the result of an incorrectly posed task - to make money.

Example

We continue the above example in numbers. We compose the BDR and BDSF fitness club.

After the sale of subscriptions in September, the load on the coach increased. In the case of making a profit in an already developed business, managers often withdraw funds from circulation, and if they receive losses, they inject their own capital. This is very clearly visible in the BDR and BDSDS reports. The funds received in September are not yet earned money, but an advance payment for future services. You can’t take them out of business.

How to evaluate the results?

Conclusions should be made only after a comprehensive review of the BDI and BDDS at the end of the period when the obligations are already fulfilled. In the above example, this is the end of November, when the club worked out all the advances received. Only after that you can withdraw money from the account. Then the amount of earned funds will be equal to the balance in the account.

Conclusion

Income should be recognized at the time of the sale, and expense at the time of purchase, not payment. In this case, the BDR and the BDSDS will be interconnected. Management will be able to review the integrity of the management model.