Research On The Cost Budget Indicator System Based On KPI Of H Company

Budget management has been the core of enterprise management systems, since itwas implemented by DuPont and General Electric Company in the1920s. Plan, controland incentive are recognized as the three major functions of budget management.However, as the result of insufficient attention to ensure the effectiveness of budgetimplementation control and evaluation, many companies only focus on the preparationof the budget in the processing of implementation of the budget management. Thismakes the budget can not be helpful to achieve enterprise strategy.The budget can notplay a role in helping enterprises to improve management, and just to be a slickplanning system. For manufacturing enterprises, cost budget management is the core ofbudget management. Construct a reasonable cost budget indicator system not only helpsmanufacturing companies to develop a scientific budget target, but also to strengthenand enhance efforts to the budget control and evaluation. KPI is an importantperformance management tool, and many companies use KPI as the means and methodsof performance evaluation in the human resource management. Importing KPI can notonly help to accomplish strategic objects, but also to promote the enterprise internalmanagement level.This paper studies on building a scientific and effective cost budget indicatorsystem for H Company. The current problems of cost budget indicator system inobjective setting, budget control and budget evaluation, is found by analyzing HCompany’s cost budget management and KPI system. The cost budget targets andenterprise strategy disjointed, cost budget control lack of effective control measures aswell as the budget evaluation indicator is unreasonable. The reason is pointed out as thatKPI system and cost budget indicator system are not combined. While constructing thecost budget indicator system based on KPI, this paper adopted the balanced scorecard tothe enterprise strategy is decomposed into financial, internal business process,customers and learning and growth four dimensions level KPI, and then according tothe level of KPI is decomposed into secondary KPI. Compared with the current costbudget indicator system, the advantages of the new indicator system is discovered.Finally, in order to guarantee the implementation of the cost budget indicator systembased on KPI, relevant measures are proposed include the progress of theimplementation, enterprise culture, organization systems and information technology.The research can improve H company’s cost budget management level, in order toimprove the effect of budget management. Also, The conclusion of this paper can provides some practical reference to build cost budget indicator system for othercompanies.