SOP 13 - Budgeting

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OPERATING
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Index
Edaran Digital Systems Berhad
Policies and Procedures Manual Version 1.0
Revision Date 1st June, 2002

SOP 13 Budgeting
Page No. Page 1 of 7
Section Procedures Document Process Owner
13.1.0 SCOPE
These written instructions set out the policies and procedures

for the implementation of Budgets and Budgetary Controls in
EDARAN.
13.2.0 OBJECTIVE
The objectives of these instructions are:-
13.3.1 To plan all foreseeable costs are budgeted for to identify the
future commitment versus target performance.
13.3.2 To provide Senior Management with information for the

assessment of Operational Risk
13.3.3 To define the guidelines for better Decision Making and

Performance Measurement
13.3.4 To define the role of relevant parties in the Corporate

Budgeting process
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SOP 13 Budgeting
13.3.0 ABBREVIATIONS
13.3.1 The abbreviations for documents referred to in these

instructions herein are as follows:
Document Name Abbreviation Exhibit

Budget Questionnaire BQ
Draft Budget DB
Annual Budget AB
Budget Variance Report BVR
Monthly Management Accounts MMA
Revised Budget Questionnaire RBQ
Revised Draft Budget RDB
Revised Budget RB
13.3.2 The abbreviations for Job Titles referred to in these

instructions herein are as follows:
Abbreviation Title in Full

MD Managing Director
GFC Group Financial Controller
HOD Head of Departments
GCBM Group Corporate Budgeting Manager
AFM Accounts & Finance Manager
13.4.0 PROCESS FLOWS
Refer to Flowchart.
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SOP 13 Budgeting
13.5.0 POLICIES
13.5.1 The GCBM is responsible for the Setting-up, the Monitoring,

and the Communicating of the Corporate Annual Budget.
13.5.2 The BQ must include areas such as:

Group Missions and objectives
Turnover / Revenue / Sales
Direct Cost / Cost of Sales
CAPEX
OPEX
Human Resource Planning
13.5.3 The BQ must be evaluated based on:

Last Years Budget and Business Plan
The Groups Strategic 5-year Business Plan
Historical Results (Including Last Years Audited Results)
Company Policy
13.5.4 The Annual Budget must take effect from the date it is
endorsed by the BOD.
13.5.5 At the Monthly Budget Variance Discussion at the Monthly

Management Committee meetings, the following must be
identified, minuted, and filed in a safe location:
Variances
Reasons for Variances
Risk Issues / Impact
Steps taken to Improve the Situation
13.5.6 The whole process of preparing the AB must not exceed 3

months after the initial date of sending out of the BQ.
13.5.7 The MC is responsible for determining if a RB is to be

prepared and the specific cut-off date for the RB.
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SOP 13 Budgeting
13.6.0 PROCEDURES
13.6.1 Annual Budgeting Process
13.6.1.1 At the beginning of each Financial Year, the GCBM shall BQ GCBM
tabulate a BQ that is distributed to the HOD. The BQ should
include the important areas as defined in 13.5.1.2.
13.6.1.2 The HOD shall then fill in the BQ based on the expected BQ HOD
Sales / Revenue and Direct Cost, and the expected OPEX as
well as the CAPEX and also the respective department staff
strength, and submit them to the GCBM within 2 weeks from
the date of receiving the BQ.
All the relevant Head of Departments must response and

reply promptly to the BQ, failing which, a disciplinary action
may be taken against them.
13.6.1.3 The GCBM shall review the BQ submitted by the various BQ GCBM
HOD.
13.6.1.4 The GCBM shall then contest the prepared BQ, on an BQ GCBM
individual basis, with each HOD.
13.6.1.5 The GCBM shall then prepare a DB for the Group which will DB GCBM
then be forward to ALL those involved in the budget process
for their agreement and signatures.
13.6.1.6 The GCBM shall discuss the DB with the GFC prior to DB GCBM
discussion with the MC.
13.6.1.7 The GCBM shall then table the DB to the MC for discussion. DB GCBM
Then, obtain the approval of the MC members.
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SOP 13 Budgeting
13.6.1.8 The GCBM shall then call for a Budget meeting with the DB GCBM
BOD where he will presents the DB to the BOD (who will
then contest the budget and further scrutinise it before
approving it). Upon when amendments of the BODs
decision are made, it will become the AB for the coming
year.
13.6.1.9 The Budget meeting should be minuted in detail to assist in Minutes GCBM
the preparation of the final budget.
13.6.1.10 Upon the BODs approval, the GCBM shall then amend AB GCBM
accordingly before distributing copies of the AB to all HODs.
13.6.1.11 The AB will then be reviewed on a monthly basis at the AB GCBM

Management Committee meetings and any variances will be
explained by the HOD.
13.6.2 Monthly Budget Variance Discussion Process
13.6.2.1 The GCBM shall prepare a BVR upon receipt of the MMA BVR, MMA GCBM
from the AFM.
13.6.2.2 Copies of the BVR will be distributed to the HODs. BVR GCBM
13.6.2.3 The GCBM shall present the BVR at the Monthly BVR, Minutes GCBM
Management Committee meetings. All explanations for the
variances provided by the HODs in the meetings will be
minuted together with the proposed mitigating actions by the
meeting.
13.6.2.4 The GCBM shall file in all explanations for variances Minutes GCBM
provided by the HODs in a Budget Variance Discussion file.
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SOP 13 Budgeting
13.6.3 Budget Revision Process
13.6.3.1 Upon instruction of the MC to perform a budget revision, the 6-months Analysis GCBM
GCBM shall prepare an analysis of the Budget from the
information contained in the Budget Variance Discussion
File.
13.6.3.2 The GCBM shall then tabulate a RBQ and distribute it to the 6-months Analysis, GCBM
HODs, together with the details of the analysis of the Budget, RBQ
and Management Targets for the financial year.
13.6.3.3 The HOD shall then fill in the RBQ based on the revised RBQ HOD
Business Plan, Sales /Revenue, Cost and the expected OPEX
as well as the CAPEX and respective staff strength for the
coming months and submit them to the GCBM.
13.6.3.4 The GCBM shall review the RBQ submitted by the various RBQ GCBM
HODs.
13.6.3.5 The GCBM shall then contest the provided RBQ, on an RBQ GCBM
individual basis, with each HOD by comparing the RBQ
against the earlier BQ, as well as considering the groups
ability to meet the set targets for the year.
13.6.3.6 The GCBM shall then prepare a RDB for the Group which RDB GCBM
will then be provided to ALL those involved in the budget
process for their agreement and signatures.
13.6.3.7 The GCBM shall discuss the RDB with the GFC prior to RDB GCBM
discussion with the MC.
13.6.3.8 The GCBM shall then table the RDB to the MC for RDB GCBM
discussion (who will then contest it and scrutinise it before
approving it.
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SOP 13 Budgeting
13.6.3.9 The GCBM shall call for a Budget meeting with the BOD to RDB GCBM
present the RDB to the BOD (who will then contest it and
further scrutinise it before approving it). Upon when
amendment of the BODs decision is made it will become the
RB for the year.
13.6.3.10 The Budget meeting should be minuted in detail. Minutes GCBM
13.6.3.11 Upon the BODs approval, the GCBM shall then amend RB GCBM
accordingly before distributing copies of the RB to all HODs.
13.6.3.12 The RB will then be reviewed on a monthly basis at the RB GCBM

Management Committee meetings and any variances will be
explained by the HOD.
13.7.0 APPENDICES
SOP13 Budgeting Process Flow
I
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SOP 13 - Budgeting

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Document STANDARD

Revision Date 1st June, 2002

Section Procedures Document Process Owner

These written instructions set out the policies and procedures

The objectives of these instructions are:-

13.3.2 To provide Senior Management with information for the

13.3.3 To define the guidelines for better Decision Making and

13.3.4 To define the role of relevant parties in the Corporate

Revision Date 1st June, 2002

Section Procedures Document Process Owner

13.3.1 The abbreviations for documents referred to in these

Document Name Abbreviation Exhibit

13.3.2 The abbreviations for Job Titles referred to in these

Abbreviation Title in Full

13.4.0 PROCESS FLOWS

Revision Date 1st June, 2002

Section Procedures Document Process Owner

13.5.1 The GCBM is responsible for the Setting-up, the Monitoring,

13.5.2 The BQ must include areas such as:

13.5.3 The BQ must be evaluated based on:

13.5.5 At the Monthly Budget Variance Discussion at the Monthly

13.5.6 The whole process of preparing the AB must not exceed 3

13.5.7 The MC is responsible for determining if a RB is to be

Revision Date 1st June, 2002

Section Procedures Document Process Owner

13.6.1 Annual Budgeting Process

All the relevant Head of Departments must response and

Revision Date 1st June, 2002

Section Procedures Document Process Owner

13.6.1.11 The AB will then be reviewed on a monthly basis at the AB GCBM

13.6.2 Monthly Budget Variance Discussion Process

Revision Date 1st June, 2002

Section Procedures Document Process Owner

13.6.3 Budget Revision Process

Revision Date 1st June, 2002

Section Procedures Document Process Owner

13.6.3.10 The Budget meeting should be minuted in detail. Minutes GCBM

13.6.3.12 The RB will then be reviewed on a monthly basis at the RB GCBM

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