VIІI  Международной научно-практической конференции

 «Достижения высшей школы – 2013»

Срок подачи: 15.11.2013

Сроки проведения: 17-25.11.2013

Место издания: Бял ГРАД-БГ (г.София, Болгария)


Оргкомитет планирует размещать доклады на Web-странице по адресу:

Economics / 2. Finance and Banking


Sedep Mirzhakypova, d.e.s., professor


Turar Ryskulov Kazakh University of Economics, Republic of Kazakhstan


Aspects of the budgeting system in Kazakhstan commercial banks


Bank management in a market economy against the background of the qualitative development of banking technologies, the emergence of new bank products and high competition in the banking market requires not only professionalism, but also the availability of effective methodological tools of work.

The main content of a new stage of banking sector development, in accordance with the Decree of the President of the Republic of Kazakhstan dated by February 1, 2010 № 923 "Concept of the financial sector of the Republic of Kazakhstan in the post-crisis period", should be improving the quality of banking activities, including the expansion of the banking products and services, their quality growth and improved ways of providing, enhancing of long-term performance and stability of the banking business. The concept focuses on the extensive use of information technology, further competition growth, transparency and market discipline in the banking sector, the long-term results and more rationale business practices, the effective management systems development, including risk management.

One of the main ways of management tasks solving, achieving of sustainable and profitable bank operation is system of budgeting. In the latter days, top-managers of a great deal of commercial banks have to cope with the issues of budgeting because due to declining incomes and rising risks of banking operations, it becomes difficult to maintain business efficiency at a given level and use of bank budgeting in business processes provides additional competitive advantage, reduces costs and improves bank`s efficiency.

It should be noted that budgeting in management accounting is a kind of an independent tool, which helps to increase bank efficiency with sufficient income and reliability. In our opinion, budgeting is a system of bank management by means of activity planning of all the bank divisions, through budgeting and monitoring of their performance, record keeping and analysis of deviations from the plan (standards).

According to Chausov (2003: 16) "the task of budgeting beneath our very eyes is being transformed from an insignificantly demanded management technology into an urgent need for organization of the effective operation of the credit institution. Planning and accounting procedures are not only applied to business operations of the bank now, but to the whole range of bank operations.

In order to ensure more effective functioning of the bank at its sufficient reliability, budgeting system must meet the following requirements:

- interaction between units in relation to reallocation of bank resources;

- provision of connection between bank`s strategy and operational management;

- use of management accounting data bank for budgeting;

- ability to analyze the effectiveness of management different levels, as well as lines of business, customers, distribution channels and financial structure;

- optimal combination of budgeting with information systems of the bank;

- effective risk management system.

Budget system allows executives to assess in advance the effectiveness of the management decisions, allocate resources in business areas optimally, outline bank development ways, reduce risks and avoid crises.

Of special note are the existing differences in the interpretation of the term "budget". One thing is to organize budget management, based on planning of economic costs estimates and bank’s budgets of income and expenses. But quite another thing is a comprehensive budget that not only includes budgeting of income and expenses, but also assets and liabilities of the bank.

Despite the fact that the term "budget" derives from the French word «bougett», which means a "leather bag", it was originally used in England beginning from 1870 as a title of document comprising a Parliament approved plan of state`s revenues and expenditures (Balabanov 2000: 184 – 185), with respect to an individual economic agent 'budget' is considered as accounting method, which allows to compare actual results with targets, also as an effective tool for decision-making, through which enterprise top-managers provide the most rational use of the property owners.

According to the Chartered Institute of Governors of Management Accountants (U.S.), budget is "quantitative in terms of money plan, prepared and adopted prior to a certain period, usually showing the planned amount of income that must be achieved, costs which must be reduced during this period, and capital, which should be involved in order to achieve this goal" (Sheremet 2000: 43-44).

A major issue in the implementation of management accounting and budgeting is to determine the depth of management tools. It is one thing to plan bank activities as a whole, and quite another to budget centers of financial responsibility. With the shift to a deeper level of specification not only the amount of budget forms, but also the number of procedures increases.

Introduction and development of budgeting is always a difficult task for banks as it forces all staff to mobilize, alter the well-established management tradition, makes the heads of all departments to think in a new way.

Budgeting system will function effectively if the bank holds the following principles of budget planning:

- bank planning system should be attached to the existing system of financial responsibility centers and controlling;

- adjustment process in the planning system must comply with changes in the organizational and financial structures and bank management systems;

- planning system should include a motivation system for senior managers and the bank staff ;

- it is necessary to clearly define the rights, managers duties and responsibilities of bank business centres;

- calculation of the target values ​​of the budget should be based on initial situation analysis, achievements, strengths and weaknesses of bank business units, considering identified reserves of revenue increase, costs reduction and risks minimization;

- it is important to plan all the necessary measures to compensate for losses in the risk event;

- plans should be optimized with regard to the interests of shareholders, as well as the economic and investment criteria;

- the financial activities of the bank should be outlined , that mathematical modeling techniques could be applied for planning problems solutions.

Banks should involve as much experts as possible in the budgeting process. This is due to the fact that the planning function is closely connected to the other functions of management, especially with of the bank personnel motivation. The results of the bank's plans realization largely depend on wages.

The entire procedure of budgeting should be organized in a manner, allowing obtaining at last stage of the bank's management three main budget forms as follows:

- revenues and expenditures budget, helping to manage operation efficiency;

- cash flow budget designed to manage liquidity;

- forecast balance needed to control the value of the assets of bank.

Some banks consider that preparation of only income and expenses or cash flow budget is enough. However, for the effective planning of bank activity at the output it is advisable to obtain all three budget forms. Banks economic efficacy is measured by the revenues and expenditures budget, in cash flow budget funds flows are planned directly, and forecast balance sheet reflects the economic potential and the bank financial condition.

It should be noted that budgeting is a part of the administrative accounting as well as a range of organizational tasks on bank's management. Budgeting begins from the construction of the financial structure, where accounting centers are defined (cost centers, profit centers). Budgeting efficiency largely depends on how the responsibilities between the company`s divisions are distributed. The composition and the structure of the accounting centers determine bank`s financial structure, which, as a rule, does not coincide with its organizational structure.

Vigdorovich (n.d.) points out that an important distinction between the profit centres and cost centres is the fact that profit centres’ revenue part of the income statement  is formed from the" external" revenues from customers, whereas in the cost centre revenues can be generated solely by" internal "revenue services provided at the expense of other departments service.

Afterwards, composition of direct, indirect costs and revenues from core business activities are determined. Allocation of direct and indirect costs, fixed and variable income and expenses is an important element of budgeting technology. The result is a group of items of income and expense, determined not by the planning and control objectives, but by the implication of similar technologies of accounting and planning. If necessary, a system of internal (transfer) pricing is introduced.


Further, a budget plan is developed, indirect costs posting and income assignment algorithms on bank business units are approved. The budget plan must include both items of income and expenditure, which are part of the management accounting. Composition of budget plan items  reflects management's view on what performance of bank should be planned and controlled. Usually the basis for developing the budget plan in banks is reporting form number 2, containing a wide range of items of income and expenses.

Eventually, the development of financial plan is the final stage of budget planning. During the development of the financial plan the aggregation of the budget values ​​ lines with similar financial instruments within the planned budget period is conducted. The financial plan, in its turn is a source of information for work on financial management, as it contains the information about the funds movement in terms of financial instruments, and not in the context of revenue and expenditure.

Describing the nature of the budgeting system, Konyaev (2009: 37-41) notes that the budgeting system of a commercial bank can be viewed from two perspectives. First, from a functional position, it is a set of budget relations, forms and methods of budgeting. Second, in institutional terms, it is a collection of financial responsibility centers, conducting financial activities.

Therefore, budgeting is a process of resource planning and plans implementation control, based on the bank budget  designed for optimal distribution of available resources in a period of time by business lines. The introduction of budgeting systems is a complicated and time consuming process, however properly organized management provides bank boards with the necessary objective information on bank activities and allows making on its bases optimal management decisions.




Balabanov, I. (2000) Financial Analyses and Panning in Economic Entity, Moscow: Financial Analyses and Planning.

Chausov, V. (2003) Technology of introduction of financial planning and budgeting in commercial bank, in `Banks and Technologies`, No.4, 16-20.

Konyaev, A. (2009) The organization of the budgeting system in commercial banks, in `Money and Credit`, No.10, 37-41.

Sheremet, A. (2000) Managerial Accounting, Moscow: FBC-Press.

Vigdorovich, M. (n.d.) Aspects of modern budgeting in the bank, online access at (accessed  06.04.2013).