Budgeting Process Budgeting Information One

Budgeting Process

Budgeting Information

One of the most recognizable brands within the United States is the Ford Motor Company. For generations Ford had represented success and dominance within the world of automobile sales. Its company practices and asset management was largely responsible for that success. However, Ford Motors Company has had some recent financial trouble in the midst of the current economic crisis. In fact all of the Big Three American automotive companies have seen their share of revenue drops and financial trouble within the past year Yet, as a major American corporation with a long standing history of success in both sales and corporate management, the company has not completely doomed itself yet. Rather, it is taking a new stance on how to work most efficiently within the modern market, one which proves much different from those of previous years and generations. Within the company's new strategies and account management come new methods of proposing and implementing its budget along with new ways of most efficiently providing and handling financial information.

Like most other major American corporations, the Ford Motor Company's budget process begins from the top. Top executives in the company spend time drafting and polishing their annual an quarterly budgets for the various departments under the company's umbrella, (Takana 2004). Managers and regional department heads report to upper level managers who then compile the budget information within the technology deployed to prepare the annual budget. Much information is needed in order to prepare these preliminary budget documents. Information is drafted from previous budgets along with overages and current balances compared to annual gross income. Once this budget is combined and consolidated, it is confirmed by the Board of directors and then sent out to the shareholders. The capital budget is established based on the findings of the Research and Development departments and their findings regarding what is necessary for the following year. In the case of Ford's 2009 budget, the capital budget included more funding for green initiatives. However, employee compensation costs were cut along with the funds necessary for the plethora of car models Ford had previously produced. In this declining economy, Ford has made within its capital budget decision making to cut the number of models produced in order to most effectively produce the highest selling models without wasting much needed funds.

Ford Motors is a global sized company, and so it depends the technology in order to function properly within a global spectrum. Previous years accounting information of both local and regional information was fracture by the lack of a technology which seamlessly united the various locations of the company. This system proved inadequate and expensive in terms of maintenance expenses. In order to get a better grasp on the generation of financial information, Ford Motors turned to PeopleSoft Financial Management in order to provide the most applicable technical tools in order to provide the best financial information at the highest functionality without such a high overhead in maintenance costs (Oracle 2009). PeopleSoft answered Ford's call and simplified the process of creating financial information by eliminating the fractured process by condensing the company's process. Rather than continuing the company's approach by handling local and regional financial information separately, PeopleSoft used the latest database technology and created a single united database in one location to handle all financial reporting and information handling from one single location in Dearborn Michigan. This process helped Ford create a common chart of all current and past accounts. Due to Ford's international presence, this database needed to be accessible remotely, and so the database was created to have remote access from any browser in Ford's locations in 120 countries. Utilizing this technology is a fundamental piece of Ford's mission, therefore it was important to make sure that technology used would be accessible and easily manageable by its employees. Since the technology used is simple enough to be used on a regular browser, there is little in depth technology training needed by the majority of employees who would be using and accessing the system. This helps reduce training costs as well as ensures practical usage within the company. Since Ford's financial position has taken a tumble from its successful days of the past, this technology proves essential in reducing unnecessary costs and helps keep the company running as smoothly as possible without reckless spending. Eliminating unnecessary high maintenance costs have helped open up funds to other departments which are in greater need.

Another major element which has helped streamline Ford's budgeting practices is the company's move to adopt alternative performance evaluation mechanisms. A Balanced Scorecard is a great way to efficiently analyze performance and prepare for future moves and objectives. In many cases, traditional budgeting processes are too costly and too time consuming. In order to make the budgeting process as efficient as possible, "Some companies are shortening their annual budgeting processes to quarterly cycles to better accommodate market fluctuations and shorter product lifecycles," (Takana 2004:2). In the middle of a fluctuating market, Ford had begun to make the move to more alternative methods of budget processing and performance evaluations. The current market is a dangerous one, and in Ford's vulnerable position the company has to be flexible and careful with new objectives and policy implementations. Since Ford's strategy is changing towards a more downsized version of its older self, the budgeting process needed to establish that change must also develop into something much more alternative. Thus Ford's decision to use more adaptive strategies such as a Balanced Scorecard is a smart one, and one which may eventually pay off as this current market continues to change and forces Ford to keep adapting to curve balls left and right.