Jae K. Shim - Budgeting Basics and Beyond

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Copyright 2012 by Jae K. Shim, Joel G. Siegel, Allison I. Shim. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Shim, Jae K.

Budgeting basics and beyond/Jae K. Shim, Joel G. Siegel, Allison I. Shim. 4th ed.

p. cm. (Wiley Corporate F&A series)

Includes index.

ISBN 978-1-118-09627-7 (hardback); ISBN 978-1-118-12796-4 (ebk);

ISBN 978-1-118-12797-1 (ebk); ISBN 978-1-118-12798-8

1. Budget in business. I. Siegel, Joel G. II. Shim, Allison I., 1984III. Title.

HG4028.B8S558 2011

658.154dc22

2011015866

To Chung Shim, dedicated wife and mother;
Roberta M. Siegel, loving wife and colleague;
and Sylvia and Arnold Siegel, loving mother and brother

About the Authors

Jae K. Shim is a professor of accounting and finance at California State University, Long Beach and CEO of Delta Consulting Company, a financial consulting and training firm. Dr. Shim received his MBA and PhD degrees from the University of California at Berkeley (Haas School of Business). Dr. Shim has been a consultant to commercial and nonprofit organizations for more than 30 years.

Dr. Shim has more than 50 college and professional books to his credit, including Managerial Accounting, Barron's Accounting Handbook, Barron's Dictionary of Accounting Terms, 2012 GAAP, Encyclopedic Dictionary of Accounting and Finance, 20112012 Corporate Controller's Handbook of Financial Management, U.S. Master Finance Guide, Dictionary of Personal Finance, Investment Sourcebook, Dictionary of Real Estate, Dictionary of International Investment Terms, Dictionary of Business Terms, The Vest-Pocket CPA, The Vest-Pocket CFO , and the best-selling The Vest-Pocket MBA .

Thirty of his publications have been translated into foreign languages such as Chinese, Spanish, Russian, Polish, Croatian, Italian, Japanese, and Korean. Professor Shim's books have been published by Thomson-Reuters, John Wiley & Sons, McGraw-Hill, Barron's, CCH, Prentice-Hall, American Management Association (AMACOM), and the American Institute of CPAs (AICPA).

Dr. Shim has been frequently quoted by such media as the Los Angeles Times, Orange County Register, Business Start-Ups, Personal Finance , and Money Radio. Dr. Shim has also published numerous articles in professional and academic journals. He was the recipient of the Financial Management Association International's 1982 Credit Research Foundation Award for his article on cash flow forecasting and financial modeling.

Joel G. Siegel , PhD, CPA, is a financial consultant and professor of accounting and finance at Queens College of the City University of New York.

He was previously employed by Coopers and Lybrand, CPAs, and Arthur Andersen, CPAs. Dr. Siegel has acted as a consultant to many organizations, including Citicorp, International Telephone and Telegraph, United Technologies, American Institute of CPAs, and Person-Wolinsky Associates.

Dr. Siegel is the author of 67 books and about 300 articles on accounting and financial topics. His books have been published by Prentice Hall, McGraw-Hill, HarperCollins, John Wiley & Sons, Macmillan, International Publishing, Barron's, Southwestern, Aspen, Richard Irwin, Probus, American Management Association, and the American Institute of CPAs.

Dr. Siegel's articles have been published in many accounting and financial journals, including Financial Executive, Financial Analysts Journal, CPA Journal, Practical Accountant , and the National Public Accountant .

In 1972, he was the recipient of the Outstanding Educator of America Award. Dr. Siegel is listed in Who's Where among Writers and Who's Who in the World . His international reputation led to his appointment in 1992 as chairperson of the National Oversight Board.

Allison I. Shim is CFO of Delta Consulting Company. She is a finance expert and a PhD candidate at the University of California, Irvine.

Preface

Better budgets can boost your department and your career to higher levels of performance and success. Savvy executives use the budgeting process to take stock of their direction, refine their goals, and share their mission with their staff. Their budgeting reveals their position in the market, places untapped resources at their command, and motivates all employees to greater levels of productivity. They use their budgets to propel them toward the top of their industry. This book will show you how to get there.

Budgeting Basics and Beyond shows you how the budget can be your most powerful tool for strategy and communications. It points out that the budget brings into stark relief all of the factors that every manager must consider, such as industry conditions, competition, degree of risk, stability of operations, capacity limitations, pricing policies, turnover rates in assets, production conditions, product line and service considerations, inventory balances and condition, trends in the marketplace, number of employees and their technical abilities, availability and cost of raw materials, available physical resources, technological considerations, economy, and political aspects. Then it uncovers the role each of those factors plays in achieving your corporate goals. And since those goals cannot be achieved single-handedly, this book suggests ways to use the budget to help employees appreciate how they will contribute to the division's profitability. Aside from playing a vital role in creating and achieving a sound business strategy, this book shows how budgets can increase your effectiveness every day of the week. In particular, it delivers these on-the-job budgeting tools: