UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business LE THI KIM DUNG INEFFECTIVE COST BUDGETING PROCESS AT PHUC DAT LAND JOINT STOCK COMPANY MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City - 2017 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business LE THI KIM DUNG INEFFECTIVE COST BUDGETING PROCESS AT PHUC DAT LAND JOINT STOCK COMPANY MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: TRAN PHUONG THAO Ho Chi Minh City - 2017 SUPERVISOR’S REPORT ON THE FINAL THESIS SUBMITTED FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION Final thesis title: Student name: Supervisor name: General comments: Remarks on the student’s attitude: Remarks on the assignment’s academic quality: Overall assessment: Meet requirement for submitting; Not meet requirement for submitting Other remarks: - Did the student follow the report schedule? Yes No - The Turnitin plagiarism percentage:  Supervisor’s signature Other ACKNOWLEDGEMENTS I would like to acknowledge all who supported me during my studies without whom my thesis could not be completed in a proper way I would especially like to thank my supervisor – Professor Tran Phuong Thao for all her advice and guidance, without her help I could not have my thesis done in the right way I also would like to show my dedication to my colleagues at work for their continuous support I also send my sincere thankfulness to my parents and friends for their care, support and encouragement TABLE OF CONTENTS ACKNOWLEDGEMENTS LIST OF FIGURES LIST OF TABLES EXECUTIVE SUMMARY 1 PROBLEM CONTEXT 1.1 Background of Phuc Dat Land Joint Stock Company 1.2 Symptoms of the problem 1.2.1 Significant gaps between actual and budgeted expenses 1.2.2 Late completion of Budgeting in 2017 PROBLEMS IDENTIFICATION 2.1 Situation analysis 2.2 Potential problems CENTRAL PROBLEM VALIDATION 13 3.1 Identification of the Central problem 13 3.2 Central problem definition 16 3.3 The importance of the problem 19 CAUSE VALIDATION 19 ALTERNATIVE SOLUTIONS AND ACTION PLANS 25 5.1 The first solution: Build a clear process and schedule for exchange information among departments 25 5.2 The second solution: Training for manager and assistant manager levels 31 CONCLUSION 33 SUPPORTING INFORMATION 34 7.1 Summary of Methodology conducted 34 7.2 Interview guide 37 7.3 Transcripts 39 7.4 Transcript summary 49 7.5 Cost comparison Reports in 2015 and 2016 52 7.6 Questionnaires 54 REFERENCES 56 EXECUTIVE SUMMARY As the economy dramatically grows up, companies are competing fiercely to survive and contribute to that development Generating revenue is always an important issue in business plans that every entrepreneur pays much attention to aim at maximizing profits However, nowadays, cost management also plays an important role in the business and budget has become a necessary activity of any organization for the purpose of well-controlled expenses to maximize its benefits Without a proper budget, a business can hardly keep track of how much it has earned and how much it has spent to meet its shareholders’ expectations related to profits and the organization’s goals This thesis aims to explore the causes of significant variance between budget and actual financial results in 2015, 2016 and the late completion of budget in 2017 at Phuc Dat Land Joint Stock Company (“the Company”) In-depth interviews were conducted to generate the understandings from highly responsible positions about budgeting at the Company and figure out the central problem related to Budgeting The findings of this study revealed that ineffective cost budgeting process tends to play a significant issue in the matter of budget engagement and leads to the difficulties in finalizing budget on target timeline The findings are discussed in details in the research along with some recommendations for the company and management to improve the budgeting process and cost management ability to get better results which directly affects departments’ performances evaluation and the whole company’s in general Page | LIST OF FIGURES Figure 1: Phuc Dat Land Joint Stock Company structure Figure 2: Initial Cause – effect Map 12 Figure 3: Final Cause-effect Map 21 Figure 4: Meeting schedule for Budget preparation at Phuc Dat Land 29 Figure 5: Respondents information: Gender, Working years, Level, Department classification at Phuc Dat Land 36 LIST OF TABLES Table 1: Phuc Dat Land Actual and Budget Cost in 2015 Table 2: Phuc Dat Land Actual and Budget Cost in 2016 Table 3: Cost structure in Budget of Phuc Dat Land Joint Stock Company .5 Table 4: Significant differences in % between Actual and Budget data .6 Table 5: Level of factors affect budgeting process at Phuc Dat Land 23 Table 6: Estimate cost for budget skill training organized by Smarttrain center for Managers and Assistant Managers at Phuc Dat Land 32 Table 7: Summary information of respondents of first In-depth interviews 39 Table 8: Summary information of respondents of second In-depth interviews 44 Table 9: Phuc Dat Land Actual and Budget Cost in 2015 52 Table 10: Phuc Dat Land Actual and Budget Cost in 2016 53 PROBLEM CONTEXT 1.1 Background of Phuc Dat Land Joint Stock Company Established in 2013, Phuc Dat Land Joint Stock Company is a company operating in real estate industry, major in leasing office building in Ho Chi Minh City It belongs to Son Kim Group which is one of the most successful corporations in this industry The Company mains business is leasing Empress Tower Building at 138-142 Hai Ba Trung, District 1, Ho Chi Minh city with 17 floors and its revenue is nearly 170 billion VND per year As the company operates under the control of Son Kim Group, it has to follow the performance management from Head office (“HO”) with approved Budget and KPI set by BOD This is also agreed by the Investors from EXS Capital – an investment fund from Hong Kong who has invested for most of Son Kim Group projects including Empress Tower Building The operation of the Company does not fluctuate much as the stable number of lessees However, cost through years have been changed due to the demand of maintenance and renew the building to increase the quality of its service There are four main departments in which are under controlled of BOD The company’s structure is drawn as following chart: Board of Directors Accounting department Property management Operation control Internal Security Sales & marketing department Leasing Technical department Human resources Marketing Figure 1: Phuc Dat Land Joint Stock Company structure (Source: Human Resources Department of Phuc Dat Land) Page | 1.2 Symptoms of the problem 1.2.1 Significant gaps between actual and budgeted expenses P&L comparison between Actual and Budgeted Revenue, Operating expenses and EBITDA reports of Phuc Dat Land in 2015 and 2016 are showed as below (shortened version showed) which reflected the operation results of the Company in these two years It was not a bright picture as there were many issues need improving 2015 Actual Budget Variance Amount % Gross Revenue 158,027,699,003 159,209,516,144 -1,181,817,141 -1% Operating expenses 115,299,557,251 107,184,342,908 8,115,214,343 8% EBITDA 42,728,141,752 52,025,173,236 -9,297,031,484 -18% Table 1: Phuc Dat Land Actual and Budget P&L in 2015 (Unit: VND) (Source: Phuc Dat Land Profit and Loss 2015 report) 2016 Actual Budget Variance Amount % Gross Revenue 169,177,516,286 167,588,373,520 1,589,142,766 1% Operating expenses 124,516,336,035 116,220,033,417 8,296,302,618 7% EBITDA 44,661,180,251 51,368,340,103 -6,707,159,852 -13% Table 2: Phuc Dat Land Actual and Budget P&L in 2016 (Unit: VND) (Source: Phuc Dat Land Profit and Loss 2016 report) It indicated that there was significant difference between actual and budgeted in operating expenses Operating expenses includes COGS, Selling and G&A expenses which are presented above in the format of management accounting reports of the Company Revenue did not fluctuate much as there were very little differences between actual and budgeted amounts (around 1%) due to the stable income sources coming from loyalty customers who have signed leasing Page | contracts for over years Revenue stayed stable but cost differed from what had been budgeted a lot led to the fact that actual EBITDA in both years were much lower than Budget 1.2.2 Late completion of Budgeting in 2017 According to Budgeting schedule sent out by Finance Department from Son Kim Group, 2017 Budget must be finalized at the end of 2016 to prepare business plan for up-coming year However, the Company did not meet that compulsory deadline Budget for 2017 has not been finalized until the end of June 2017 after many revised versions This information was obtained from Ms Vy Oanh – Chief accountant (CA): ‘Budget of 2017 was revised many times Targets sent out by the BOD were presented in many versions I even did not remember which the last one was until it was updated into the company’s system for final records And after about months, the final budget was approved by the BOD on June, 2017.’ This information was confirmed by Mr Dung Tran - Head of Finance and Accounting Department of Son Kim Group ‘2017 is the third year Son Kim Group applying Budget in Management Control and Performance evaluation Therefore, there were still some deficiencies in the experiences and processes that led to the fact that it took months to complete the Budget This came from objective and subjective factors that we tried to deal with but still behind schedule.’ Actually, budgets of 2015 and 2016 were also behind the schedule In 2015, this was the first year the company applied Budgeting in management activity that it took around ten months to get used to the model and to build up a complete budget In 2016, the situation was improved but still under expectation that it Page | 7.3.2 Second in-depth interview with Head of Technical Department Time of interview: 14th July 2017; 5:00PM Duration: 20 minutes Venue: Empress Tower, 138-142 Hai Ba Trung, District 1, Ho Chi Minh city Interviewer: Dung Le Content: Dung Le: How you do, thanks for joining this interview, would you mind introducing about yourself and your working experience? Bao Dang: Hi Dung, I’m Dang Duc Bao, I have been working for nearly 20 years and around years for Phuc Dat Land My current position is the Head of Technical Department Dung Le: With your long working experiences, you get familiar with Budgeting and Cost management? Bao Dang: Uhm…not totally Only when working for Phuc Dat land that I have a chance to prepare Cost Budget for my department Dung Le: So in your previous companies, you did not work with budget? Bao Dang: Yup, I just provided information for Finance team to prepare that Dung Le: Oh, I see Back to Phuc Dat Land, in the Budget P&L report of 2015 and 2016, there were many significant between actual and budget And total actual expense was much higher than budgeted And most of them came from your department Could you kindly share your opinions about the differences between budgeting and actual figures in these years? Bao Dang: Hm…I had to explain to BOD many times after actual data released What a headache! 2015 was the first year Budgeting applied at Phuc Dat Land It took me a lot of time to get used to the format and the budgeting presentation I mean the way to prepare budget I have to admit that my lack of experience in Budgeting prevented me from doing it well Secondly, target set by BOD was a big deal I could not adjust and control expenses within the limitation such as technical materials which was purchased every quarter for maintenance purpose That’s not mentioned unplanned events happened out of my control due to the late communication from Building management department about problems at Lessee’s areas for timely repair to reduce the cost due to larger problems Dung Le: So from your story, I can see that there’re main problems here: Target from BOD, Lack of experience in Budgeting and Unplanned events due to late communication from other departments, right? Bao Dang: Yeah I don’t want to blame for anyone but actually it happened for reasons Page | 42 Dung Le: But according to Ms Vy Oanh – Chief accountant, it seemed that you did not get to her for collect previous year data for your up-coming year forecasting? What you say about that? Bao Dang: Lol…I think she did not remember, every quarter, accounting department sends out actual figure for departments to explain the variance with budget to BOD Therefore, based on this and my department’s action plan, I made budgeting for the up-coming fiscal year However, if there’s any change in number, I would not be noticed then So I’m not sure that the data we received was totally correct Dung Le: Why did not you ask for updated information to make accurate calculate? Bao Dang: It’s busy period of the year, I asked and did not receive anything so I think it’s better to use what I have Dung Le: About your lack of experience in Budgeting, it can easily understandable But is there any guidance or training from Head office for Budgeting preparation? Bao Dang: They had but not enough I did not see any official one Only in the first year that they acknowledged for us about budget and steps in preparing Budget After that we did it by ourselves Dung Le: So there’re still steps for Budgeting? Do you mean the Budgeting process? Bao Dang: Actually it just related to the data presentation Budgeting process? Let me see Do you mean the process that shows us what to first and next? Dung Le: Yeah I mean the timeline, deadlines, steps to collect data, connect with other departments or meetings with BOD Bao Dang: Oh, no I wish they had That’s why I and other heads found it hard to complete on deadline You can imagine that when you’re drawing something with limit time, limit resources without any clear guidance from whom you had to submit to is very difficult I hear from somewhere that they’re building up the cycle but don’t know when it will be completed Dung Le: So beside problems related to ones I mentioned before, Budgeting process was another one added to your problem in Budgeting Bao Dang: Uh…hu Dung Le: How is cost controlled in your department? Who is responsible for following cost budget with actual? Bao Dang: I am responsible for cost controlling with the support from my deputy manager During the operation, expense is kept track by an excel file with detailed budget by cost center allocated for my department This file is prepared by the deputy manager When reviewing the file at the end of each month, I will notice my employees about any abnormal issues to find out the reasons and alert for the expenditure spending Dung Le: So you are alert of any significant issues happen before receiving the file? Page | 43 Bao Dang: Obviously not And this is one of my weaknesses that I’m improving so that every problem will be dealt with immediately right after it happens Dung Le: Your deputy manager did not that? Bao Dang: During the working period, Technical department has many things to deal with related to the Building and we don’t have time to review the budget until the end of month according to Management’s requirements Therefore, we only review it at the month end Now, I and my staff are trying to improve this to control costs strictly Dung Le: Thank you for your sharing! Wish you all the best Bao Dang: You’re welcome Nice talking with you Validate central problem interviews with Head of Finance department from Son Kim group and Head of Property Management List of interviewees: Table 8: Summary information of respondents of second In-depth interview Int Full Name Age Working experience Dung Tran Mr Tran Van Dung 41 Nearly 19 years Quang Pham Mr Pham Quang 34 Nearly 12 years 7.3.3 Position Head of Finance and Accounting Department of Son Kim Group Head of Property management Years at PDL Third in-depth interview with Head of Finance department from Son Kim group: Time of interview: 20th July 2017; 5:00PM Duration: 25 minutes Venue: Sample House of Son Kim Land, 53-55 Nguyen Dinh Chieu, District 3, Ho Chi Minh city Interviewer: Dung Le Content: Dung Le: How you do, thanks for joining this interview, would you mind introducing about yourself and your working experience? Dung Tran: Hello Dung I have been working for Son Kim Group since 2013, almost years now at the Head of Finance and Accounting Department position Dung Le: With your long term of working experiences, You must definitely familiar with Budgeting, right? Page | 44 Dung Tran: Sure Dung Le: At Son Kim Group, Budget is built up from the bottom or from the top I mean the KPI will be set by BOD or built up by below level? Dung Tran: Son Kim Group follows a mixed Budget style Targets set by BOD but then budget is built up by lower levels base on those targets Dung Le: According to some opinions that targets set by BOD were much higher than actual operation, what you think about this? Dung Tran: You should view it as a whole picture Management of Son Kim Group is under pressure of investors for profits and effective operations Therefore, the final budget would be affected Some expense items would be lower than original amount sent out by each department Operations teams have to control their actual cost well to minimize the expenses incur Those targets were set based on previous years’ data and development plan for following year which was carefully studied by Management team of Son Kim Group Dung Le: Beside the pressure from investors, any other reasons led to the change in targets set by BOD followed by the change in Budget? Dung Tran: Budget was set to evaluate the company’s performance, another type of KPI, so they would be set a little bit higher to make sure employees try their best to acquire best results with available resources This was built by setting revenue with maximum leasing capacity and cutting down some redundant expenses which were not used in prior years This happened to whole group, not only Phuc Dat Land Other companies in group met the same situations as Phuc Dat It’s normal in the development path of a big group like Son Kim Dung Le: So how about the budgeting process? Does the company have the budgeting process? Is there any guidance from Head office to subsidiaries for preparing Budget? Dung Tran: Yes, we have a budgeting process with the timeline sent out to each subsidiary Each subsidiary allocates for each department to prepare the budget by themselves This will be combined by the accounting department then they send the final one to HO finance team to review and then send to BOD to get approval Dung Le: But according to some opinions that there’s a little bit guidance or training from HO for the Budget What you think about it? Dung Tran: I think there’s a misunderstanding here Finance team from HO had emailed them many times for the timelines of budget whenever there’s a change, many meetings conducted to answer questions raised by heads of departments from subsidiaries I understand that it was rough for them to revise budget due to the change in requirements from BOD this make the budgeting lasting over months in 2016 and nearly months in 2016 Dung Le: But is there any official training for Managers about budgeting? Dung Tran: Just meetings for discussion not training Page | 45 Dung Le: Ok I see In the Budget P&L report of 2015 and 2016, there were many significant between actual and budget Could you kindly share your opinions about the differences between budgeting and actual figures in these years? Dung Tran: I can show you this fact, the total revenue or total cost was not much that variance (and actually it was just around 3% - 8%), only detail accounts appeared that matter The BOD had required head of departments to explain for those differences and the matter was raised from the detail budget control by each department Dung Le: And what they explained for? Dung Tran: It came from the first the step in Budgeting that is preparing detail items It’s mostly due to some inaccurate predictions that the detail Budget was failed to reflect the actual expenses incur Dung Le: What you think that need to improve in Budgeting and Cost management at Phuc Dat Land? Dung Tran: As I said before, the matter in Budget of Phuc Dat Land related to the Detail budget So in order to improve the Budget performance of the Company, they should focus on detail budget to make more accurate forecast Dung Le: Thank you for your precious time and valuable sharing! Wish you all the best Dung Tran: You’re welcome, Dung Good luck with your Thesis 7.3.4 Fourth in-depth interview with Head of Property Management: Time of interview: 22th July 2017; 10:00AM Duration: 20 minutes Venue: Empress Tower, 138-142 Hai Ba Trung, District 1, Ho Chi Minh city Interviewer: Dung Le Content: Dung Le: How you do, thanks for joining this interview, would you mind introducing about yourself and your working experience? Quang Pham: Hi Dung Nice to meet you! I’m Pham Quang from Property Management department I have been working for Phuc Dat Land nearly years within my 12 years of working experiences Dung Le: With your long term of working, are you familiar with Budgeting? Page | 46 Quang Pham: Not totally In my previous companies, Finance team was responsible for Budget preparation, I only supported by sending information for them related to my department operation forecast But in Phuc Dat Land, I have a chance to it myself But actually till now, I am still not get almost used to budgeting Dung Le: Does the company have the budgeting process? And have you received any guidance from Head office in preparing Budget? Quang Pham: The budgeting process? I have not heard about it before I just received timeline for preparing budget sent out from HO But in the first two years applying Budget and in 2017, the timelines were changed continuously due to the revised KPI set from BOD for each department to adjust their budget But not all requirements from BOD were clearly understood We even were not be trained about Budgeting, just follow by the guidance from accounting department but not in detail Dung Le: So beside lack of guidance from HO what are difficulties in budgeting process that you meet? Quang Pham: The other difficulty I met during the Budgeting period is collecting data step Dung Le: What you mean by collecting data? Quang Pham: I mean the data I need to forecast next year operation to predict the expenses incur within the approval limitation Dung Le: And what’s wrong with that? Quang Pham: As you know, a company is a consolidation by many departments Operation of each department will affect each other However, the connection with other related departments such as Technical department did not happen due to the busy period for each department to complete Then most of my forecasting was made based on the services contracts signed with suppliers and reports from staff Dung Le: So it leads to the inaccurate data collected? Quang Pham: yeah, a part Budget was made based on managers’ experience rather than collecting information from external and internal factors Therefore, if there is any change in the cost from suppliers, budget would be adjusted or lead to the variance between actual cost and budget cost Page | 47 Dung Le: Oh, I see Do you think your lack of experience in Budgeting is also another difficulty to complete the task properly? Quang Pham: Uh huh, maybe As budgeting has just been applied from 2015, most of managers have little experience in this area but no training or guidance from Finance team was provided Dung Le: Don’t you think it also came from the Cost controlled? How is cost controlled in your department? Quang Pham: Yeah, I’ve thought of it But actually it did not account for that much In my department, expenses are followed up by an excel file with detailed budget by cost center allocated At the end of each month I will review the file combining with Management reports sent out from accounting department, any abnormal issues will be raised to my lower levels to find out the reasons and alert for the expenditure spending This helps me to control costs versa actual Adjust will be made in order to meet the KPI Dung Le: Do you notice of any abnormal events happened that leads to significant difference between Budget and Actual data? Quang Pham: Yeah At month end when reviewing the actual cost, I will notify items that need to focus more for the next month spending Dung Le: Thank you for joining this interview, Mr Quang! Wish you all the best! Quang Pham: You’re welcome! Page | 48 7.4 Transcript summary  First qualitative research: Two in-depth interviews # Question Which departments seemed to have most significant differences? And which reasons led to that? (Explore more on the reasons given by interviewee) Are you clear of the budgeting process at the Company? Is there any difficulty in proceed the process? (Explore more on the Budgeting process) Why the Budget of 2017 had not been finalized until the end of June? Was it due to any departments’ problems? Chief Accountant Technical departments - Many unplanned events happened during the year such as power system failure, major repair of several floors or replacement of some old equipment that caused more cost in their approved cost - Some targets set by BOD were much different from budget prepared by departments that they had to adjust - No clear cycle (steps) Only be noticed about the deadlines for submission - Just a little bit connection among departments during the Budgeting period: busy time of the year - Important year of the group to call for investment => KPI changed many times => Took time to revise the budget Manager of Technical Department Key points Technical departments - Target set by BOD was limited under the company resources - Unplanned events happened out of control due to late communication from other departments - Lack of experience in Budgeting by high levels - Technical departments had most significant differences - Main reasons: High target set by BOD, unplanned events, lack of budgeting experiences - Not clear guidance from Head offices, unclear budgeting process (steps) - Poor connection with other departments due to busy time of the year - Unclear budgeting process - Poor connection among departments during the budgeting period - Targets set by BOD changed many times => Took time to revise Change in targets during the budgeting period led to the revised versions of budget Page | 49 How is cost controlled in your department? Who is responsible for following cost budget with actual? x Cost is controlled daily and reported monthly by deputy manager to Head of department But not alert significant issues before reviewing the files Until abnormal issues were raised that managers reviewed their budget to check the variance between actual and budget  Second qualitative research: Two in-depth interviews # Question According to some opinions that targets set by BOD were much higher than actual operation, what you think about this? Head of Finance department of SK Group - Management of Son Kim Group is under pressure of investors for profits and effective operations Therefore, the final budget would be affected - Make sure employees try their best to acquire best results with available resources - Apply for whole Son Kim Group, not only PDL Manager of Property Management Key points x - Due to pressure from investors - Push up employees capabilities - Applied for whole group, not only the Company Does the company have the budgeting process? Any guidance from Head office to Subsidiaries in preparing Budget? - Only the deadlines sent out - Communication from Finance team mostly through emails - Haven't heard about the process Just be noticed about deadlines - Lack of experience in budgeting preparation - No clear process for budgeting preparation - Lack of experience and communication among departments Could you kindly share your opinions about the differences between budgeting and actual figures in 2015 and 2016? - The differences came from detail items, not the whole cost or revenue => It was due to fail in detail budget preparation - Total cost of the department did not variance much Only some detail items - Difference came from detail items in the Budget Page | 50 What are difficulties in budgeting period that you meet? (collecting data, connecting with other departments, committing to timelines…?) How is cost controlled in your department? Do you notice of any abnormal events happened that leads to significant difference between Budget and Actual data? Some inaccurate predictions that the detail Budget was failed to reflect the actual expenses incur - Lack of guidance from HO - Difficulty in collecting data due to poor connection among related departments - Lack of experience in budgeting - Lack of guidance and experience in Budgeting x - Expenses are followed up by an excel file with detailed budget by cost center allocated - The file is reviewed at month end combining with Management reports sent out from accounting department, any abnormal issues will be raised to my lower levels to find out the reasons and alert for the expenditure spending Abnormal issues would be noticed for the next month spending to control under budget - Expenses are still followed up by excel file - Abnormal issues will be raised for next month spending, not affect much Page | 51 7.5 Cost comparison Reports in 2015 and 2016 Operating expense (COGS, Selling and G&A) 2015 Actual Variance Budget Professional fees 147,683,500 150,000,000 Marketing & Commission 184,792,170 160,000,000 Salary and related costs Bonus 11,502,106,787 1,089,330,740 Utilities 17,825,055,211 9,946,448,000 16,503,453,000 188,525,044 196,000,000 Business trip expenses 540,923,264 468,300,000 49,079,999 60,000,000 Technical materials 1,427,581,818 Entertainment expenses Insurance fee Cleaning fee 72,000,000 135,729,586 133,252,000 2,550,067,959 Management fee 890,000,000 Security fee 1,107,883,010 Repair and maintenance Asset rental 5,306,385,465 69,029,189,579 Service fee 841,075,000 Renovation 2,050,789,500 Other operating expenses Total expenses 24,792,170 1,555,658,787 122,154,740 1,321,602,211 (7,474,956) 72,623,264 396,901,818 (2,925,699) 2,477,586 2,061,268,724 488,799,235 780,000,000 1,800,000,000 3,921,423,000 66,782,606,184 110,000,000 1,384,962,465 2,246,583,395 208,515,000 1,207,176,000 312,000,000 115,299,557,251 107,184,342,908 15% 16% 13% 8% -4% 16% 39% -4% 2% 24% 14% (692,116,990) 38% 632,560,000 364,284,318 -2% (10,920,001) 18% 1,030,680,000 69,074,301 % (2,316,500) 967,176,000 Printing and phone expenses Stationery Amount 843,613,500 52,284,318 8,115,214,343 35% 3% 33% 70% 17% 8% Table 9: Phuc Dat Land Actual and Budget Cost in 2015 Page | 52 Operating expense (COGS, Selling and G&A) Professional fees 200,954,491 Salary and related costs Bonus 19,668,982,032 Phone expenses 232,054,011 Business trip expenses Stationery 613,510,513 61,206,172 Technical materials Entertainment expenses Insurance fee 1,657,275,240 91,779,517 176,425,179 Cleaning fee 2,775,211,637 Management fee 1,090,000,000 Security fee 1,597,616,625 Repair and maintenance Renovation 12,112,734,869 1,221,131,498 Utilities Service fee Actual 171,666,665 Marketing & Commission Asset rental 2016 6,742,367,085 71,281,824,858 942,500,000 3,395,598,706 Other operating expenses 483,496,937 Total expenses 124,516,336,035 Variance Budget Amount 160,000,000 11,666,665 190,000,000 11,039,187,332 10,954,491 1,073,547,537 1,153,888,045 18,107,259,870 67,243,453 1,561,722,162 200,000,000 32,054,011 500,000,000 113,510,513 62,459,998 (1,253,826) 1,291,369,672 365,905,568 80,000,000 11,779,517 151,971,154 24,454,025 2,610,348,117 164,863,520 900,000,000 190,000,000 1,430,187,610 5,539,122,861 69,445,062,754 167,429,015 1,203,244,224 1,836,762,104 720,000,004 2,207,176,000 222,499,996 1,188,422,706 432,000,000 116,220,033,417 % 51,496,937 8,296,302,618 7% 6% 10% 6% 9% 16% 23% -2% 28% 15% 16% 6% 21% 12% 22% 3% 31% 54% 12% 7% Table 10: Phuc Dat Land Actual and Budget Cost in 2016 (Source: Phuc Dat Land Profit and Loss Management reports in 2015 and 2016) Page | 53 7.6 Questionnaires BUDGETING PROCESS AT PHUC DAT LAND JOINT STOCK COMPANY Dear sir/ Madam, I am Dung Le I am currently conducting a study on the Effectiveness of Budgeting process at Phuc Dat Land (PDL) This is an academic and non-profit study, it is anomynous and your name will be concealed I kindly request you to carefully respond to the questions to enable the researcher to obtain as much relevant data as possible The data will assist the researcher to fulfill the intended objective Objectives of this study: (i) To evaluate how budget is prepared (ii) To point out some challenges in budgeting process (iii) To recommend measures for improving planning and control within the organization GENERAL QUESTIONS Choose option for below questions What is your gender  Male  Female How many years have you been working for PDL or Son Kim Land? In which department are you working? Mark only one answer  Finance and Accounting  Property Management  Sales and Marketing  Technical  Human resources Which position are you in charge of? Mark only one answer  Assistant to Manager  Manager Senior staff MAIN QUESTIONS (a) Kindly tick the appropriate place for the answer you consider to be reasonable (b) When requested to comment, please it in the space provided Page | 54 Are you normally involved in the preparation of budget? Mark only one oval  Yes  No If yes, what is your responsibility? If no, who prepares it? (Stop here, thank you) Are you clear of objectives before joining the budgeting process at the company? Mark only one oval Totally clear Not clear Do you know anything concerning budgeting process at Phuc Dat Land? (procedure, purpose, timeline, ) Do you receive any guidelines for the budgeting process from your senior managers? (Please indicate if there's any guidance) From your experience, in the budgeting preparation process, does you department connect closely with other departments? Mark only one oval  Yes (skip next question)  No 10 Where you get information when preparing budgeting? 11 Rank the following factors affect the budgeting process at PDL from the most to the less one Mark only one oval per row Unclear timeline for the process Poor interaction among departments Lack of data for budgeting Lack of budgeting training Managers lack of accountability 12 For your opinion what actions if put into practice to improve the effectiveness of budgeting process at PDL? Page | 55 REFERENCES Jacqueline Birt, Accounting, Business reporting for Decision making 4th edition 2012; p382 de Waal A,A Is your organisation ready for beyond budgeting? Measuring Business Excellence 2005;9(2):56-67 Elizabeth Hamilton Foley, Budgeting and Financial planning: The Budgeting Process, 2010; Available from: http://www.nonprofitaccountingbasics.org/reporting-operations/budgeting- process H James Harrington, Frank Voehl The Innovation Tools Handbook: Organizational and Operational Tools, Methods, and Techniques That Every Innovator Must Know; Volume ProtoView 2016 Jun 17;3(24) Shastri, K., & Stout, D E (2008) Budgeting: Perspectives from the real world Management Accounting Quarterly, 10(1), 18-25 Retrieved from https://search.proquest.com/docview/222802149?accountid=63189 Bogiages G dynamic budgeting focuses on the future Accountancy SA 2004 04:9-10 E James Burton, Steven M Bragg Accounting and Finance for Your Small Business 2nd edition Wiley, 2006: 312 ACCA approved: Performance management Ninth edition London: BPP Learning Media Ltd and BPP House, Aldine Place; 2016 Felix Olurankinse Poor budgetary performance: causes and implications for development Volume 1, No.2 European Centre for Research Training and Development UK; 2013:53-66 Page | 56 ... preparation at Phuc Dat Land 29 Figure 5: Respondents information: Gender, Working years, Level, Department classification at Phuc Dat Land 36 LIST OF TABLES Table 1: Phuc Dat Land. .. Table 9: Phuc Dat Land Actual and Budget Cost in 2015 52 Table 10: Phuc Dat Land Actual and Budget Cost in 2016 53 PROBLEM CONTEXT 1.1 Background of Phuc Dat Land Joint Stock Company. .. Dat Land Actual and Budget Cost in 2015 Table 2: Phuc Dat Land Actual and Budget Cost in 2016 Table 3: Cost structure in Budget of Phuc Dat Land Joint Stock Company .5 Table 4: Significant