Why do we need BDR and BDDS?

2024 Author: Howard Calhoun | [email protected]. Last modified: 2024-01-17 18:37

To control the financial flows in the enterprise, the management makes different budgets and balances. These reports are supplemented by BDR and BDDS. The abbreviations hide the budget of 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 BDDS - what is it?

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

The cash budget reflects the company's cash flows. That is, the report includes only those articles for which the movement of funds took place. The report is used to reallocate funds.

Differences between BDR and BDDS

1. BDR contains information about the planned profit, BDDS - the difference between incoming and outgoing cash flows.
2. BDR is similar in structure to the income statement, and BDDS is similar to the income statementfunds.
3. BDDS, unlike BDR, includes only “money” items.

Report structure

Let's take a closer look at what indicators are reflected in each of the reports. Let's use the table for a better perception of information.

Depreciation	BDR
Revaluation of goods and materials	BDR
Inventory surplus/shortage	BDR
Exchange and amount differences	BDDS
Get/Pay Loans	BDDS
Capital investment	BDDS
Taxes	BDDS

When budgeting, the finance department most of all has questions about 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 activities of production. Therefore, the amount of accrued taxes should be displayed from the report.

How BDR works

The basic principle of budgeting is to include in the report all indicators that characterize the activities of the organization. Only if the BDR and BDDS will contain all management budgets, we can talk about the integrity of the system. Moreover, these tworeports 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 debts, about payments. Operating with figures from only one report, it is impossible to build a coherent budget model.

The manager is given the task to “sell at any cost”, and he quickly completes it. The management is already calculating profits and accruing bonuses, but is faced with an unexpected problem - the company does not have the money to purchase raw materials for the next batch of goods, and the supplier does not provide commodity credit. The manager sold out the goods, and he was given the accrued bonus. But the money hasn't actually arrived yet. 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 the returned funds. Then cash gaps will not arise. To do this, it is necessary to form the BDR and BDDS.

How BDDS works

Sometimes the finance department makes only BDDS, forgetting about accruals. It is dangerous to manage the economy only by the cash method. Received - this is not yet earned money. The accrued profit is reflected in the BDR, and the fact of its receipt - in the BDDS. They rarely match. Most often, an organization has either a receivable (payment from a client) or an accounts payable (advance payment) debt. Therefore, it is necessary to draw up BDR and BDDS reports at the same time.

Many managers recognize income only when funds are received, and expenses - when they are used. But in this case, the debt is not displayed, an important part of management information is lost.

To illustrate what mistakes cash-based economics can lead to, let's look at a simple example. In September, the fitness club 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 by individuals, there is no need to talk about receivables. But the organization has obligations to serve customers. All this is the result of an incorrectly set task - to make money.

Example

Let's continue the above example in numbers. Let's make BDR and BDDS of a fitness club.

Fitness center expenses (thousand rubles)

Indicator	September	October	November
Income	150	40	0
Expense:	90	90	70
advertising	20	20	0
salary	40	40	40
rental	20	20	20
maintenance of simulators	0	10	10
Profit	70	-50	-70
Dividends	-70	+50	+70
Remainder	0	0	0

After the sale of season tickets in September, the load on the coach increased. In the case of making a profit in an already developed business, managers more often withdraw funds from circulation, and when they receive losses, they pour in their own capital. This is very clearly seen in the BDR and BDDS reports. The funds received in September are not earned money yet, but an advance on future services. You can't take them out of business.

How to evaluate results?

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

Conclusion

Income should be recognized at the time of the sale, and expense at the time of purchase, not payment. In this case, BDR and BDDS will be interconnected. Management will be able to view the integrity of the managementmodels.