Annual budgeting
The annual budget is the conclusion of the company’s strategic
plan in actual numbers/financial figures. Preparation of the annual budget
shall commence in December of each year so that the budget for
the following financial year could be finalized and approved before the end of
the current financial year.
The Corporate Office Finance department shall prepare the
annual budget format and send it to PMD Accountants along with necessary
guidelines promptly. It is the responsibility of all Project Managers
and Heads of Business Units to submit project budgets and business unit budgets
to the respective PMD Accountant promptly. PMD Accountants shall
compile a PMD budget based on the project budgets and business unit budgets
submitted by Project Managers and Head of Business Units, respectively. Budget
discussions shall be conducted, and necessary amendments shall be made to
project budgets and business unit budgets before the compilation of the PMD
budget. The GM of respective PMD shall approve the PMD budget before submitting
it to the Corporate Office. Similarly, GM-Finance shall call for the budgets of
the departments coming under the Corporate Office.
The GM-Finance shall review the PMD budgets and departmental
budgets and advise respective personnel to make the necessary changes if
required. GM-Finance shall forward the PMD budgets and departmental budgets for
the COO’s approval with necessary recommendations. The COO may advise
amendments to the budgets forwarded by the GM-Finance and approve them after
the incorporation of amendments. The Corporate Office Finance department shall
compile the overall company budget based on the approved PMD budgets and
departmental budgets.
The COO shall approve the overall company budget, which
will be presented to the Board of Directors for their sanction.
Project budgeting
Initial budget
The Project Manager shall be responsible for the preparation of the project budget with the assistance of the Planning Engineer and Quantity
Surveyor and his other staff, if necessary, in consultation with the planning
and monitoring team of PMD, before the commencement and execution of work of
The project. The following documents shall be used to prepare the project
budget but not limited to;
• Bill of
quantities
• Project
contract document & specifications
• Master
material indent
• Resource
plan
• Construction
program
• Risk
assessment report
The Project Manager, after finalization of the project
budget at his level, shall forward it to the GM of particular PMD. GM shall
propose amendments to the budget by himself or shall hold an initial budget
discussion with the project team to make necessary amendments to the
budget. The budget shall be forwarded by the GM-PMD, with his recommendations
for COO’s approval. The COO shall approve the budget with changes he proposes
in consultation with the consultation of GM-PMD and the project team. The
following documents are to be sent to the COO with the proposed budget;
• Budget bill
of quantities
• Monthly
breakups of the budget (overhead cost & direct cost)
• Cash flow
forecast
• Resource
allocation plan (material, machinery & men)
• S curve
The initial approved budget shall be uploaded to SAP system by
the Planning Engineer of the project or by the PMD project monitoring team.
Revised Budgets
The Project Manager and his team shall identify the needs to
amend the project budget while execution is in progress. Where the requirement
for a budget revision arises, the project manager shall submit a budget
revision request with a clear justification to the GM-PMD. The GM shall get the
proposed budget revisions through his office and make recommendations, as
necessary to COO. All budget revisions required to be approved by the COO.
Approved budget revisions shall be uploaded to the SAP system.
Project budget releasing
In executing a project budget through SAP, budget release
can be done in two ways. The authority for a budget release will lie on a
designated person approved by the management.
• Overall
project release
• Individual
elements based release
Overall budget release
When a project is considered to be released as a whole first,
the project definition shall be released, and following this, the WBS elements,
networks, activities, and activity elements will be released simultaneously. The
decision of an overall project release lies in a higher authority, as decided by
the COO. By triggering this process, an impact on the release of the budget will
occur as all material requirements will be converted into purchase requisitions
and will, therefore, require a large budget release initially.
Individual element based budget release
If a project budget needs to be released in stages as
individual work packages following a scheme towards completion, this can be
done by releasing a defined work package or a WBS element. This will not have a
huge impact on budget releases as it only requires the material requirement
stated in the specific work package, thereby will only call for consecutive
small budget releases. The decision of an individual element based release lies
on a higher authority as decided by the COO.
Project budget monitoring
The Site Accountant shall prepare the Budget Variance
Analysis report and P&L account every month, and this shall be reviewed
and approved by the Project Manager. The approved Budget Variance Analysis
The report, along with the following documents, shall be submitted to the PMD. It is
the responsibility of the Project Manager to provide reasons for significant
variances.
• P&L
account
• Budget
Variance Analysis report
• Bill
payment monitoring report
• Cash flow
monitoring report
• S curve
report
The site engineering staff is responsible for the preparation of
the above documents. The respective PMD office shall review and validate the
reasons for significant variances and shall prepare a report with observations.
Documents described above shall be taken up for discussion at the monthly progress
meeting of PMD. Root causes for budget variances shall be analyzed, and
necessary action shall be taken to rectify deviations. The same
documents shall be taken up for discussion at the Corporate Office progress
review meeting, and remedial actions to be made shall be finalized.
CAPEX Budgeting
CAPEX (Fixed Assets purchases) encompasses the purchases of
an asset of a value above LKR 10,000/- that would provide long term
benefits (more than one year) to the Company. In the CAPEX budgeting process, the
CAPEX budget amount is decided by the GM- PMD or COO at the beginning of the
year. Based on this approval Accountant can assign the budget in the system,
creating CWIP assets and assigning relevant Investment order can be done by the
Asset Account Executive.
CAPEX budgeting for a project
It is the responsibility of the Project Manager, Site
Engineer & Quantity Surveyor to identify the fixed asset requirements of
the project by referring to the project`s resource plan. Based on the fixed assets
requirements, PMD Accountant prepares the CAPEX budget and obtain a recommendation
from the Project Manager. After finalizing the CAPEX budget, it shall be
forwarded to the GM-PMD to make recommendations & approval. GM-PMD approved
budget shall be forwarded to the COO to obtain the final approval. The COO
shall approve the budget with changes he proposes. Based on COO’s approval GM -
Finance can assign the budget in the system by creating CWIP assets and
assigning the relevant Investment order.
CAPEX budgeting for other business units
Head of a respective business unit (other than projects)
Required to identify the new asset requirements for the financial year. Based on the required fixed assets, the Site Accountant shall prepare the new annual CAPEX
budget. The new annual CAPEX budget shall be forwarded to GM-PMD/SGM with the
approval of the Head of the business unit. The approved CAPEX budget shall be forwarded
for COO’s approval. Based on COO approval GM -Finance creates CWIP Assets &
assigns the relevant investment order.
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