Strategic budgeting process based on the balanced scorecard system and an application model

STRATEG C BUDGET NG PROCESSBASED ON THE BALANCED SCORECARD SYSTEM AND AN APPL CAT ONMODELRifat YILMAZABSTRACTBudgets, as financial representations of operational details of the company?s costsand revenues, are not explicitly linked to the long-term implementation of strategy As aconsequence, people at lower levels don?t know how their work fits in with achievingcorporate strategy. Nor are their goals linked to achieving strategy The approach that relatesbudgeting process with strategy is termed ?strategic budgeting?. Strategic budgeting is theprocess of allocating scarce funds to high-priority activities. Strategic funds are theexpenditure items used to finance the implementation of strategic activity programs.However, the benefits of these expenditures are realized in the long-run, beyond the currentbudgeting period. The strategic budget of a company allocates the necessary funds toundertake fundamental changes in its existing business strategies and is often defined withspecific projects and programs. Strategic budgeting is not a simple process. There arecontroversies as to the best utilization of funds. Nevertheless, the strategic plan is always theguiding force.The approach that best establishes the link between budgeting and strategicbudgeting is the Balanced Scorecard. Balanced Scorecard is a dynamic performancemeasurement system, a strategic management system and a communication tool that is builton past performance data and aims to improve and bring to perfection the company?sactivities in line with the expectations of customers and shareholders. In order to keep in pacewith constant change, this system takes into account intangible perspectives(value) such aslearning and growt within the context of human element, system and company- internalbusiness procedures; measures these perspectives using certain indicators, provides strategicfeedback to ensure a balance and integration between both the perspectives and the metrics ofthe past and the future; establishes a link between the measurements and the strategy and aimsto make the strategy applicableThe Strategic Budgeting Process Based on the Balanced Scorecard; enablescompanies to establish a link between their strategies and budgets. In this study, a StrategicBudgeting Model Based on the Balanced Scorecard has been developed and put into practicein Marshall Boya and Vernik Industries Inc.