000069110 EXPLORATARY STUDY OF BUDGET PRACTICE IN VIETNAMESE COMPANIES (NGHIÊN CỨU THĂM DÒ THỰC TIỄN NGÂN SÁCH TẠI CÁC DOANH NGHIỆP VIỆT NAM)
BUDGETING SYSTEM IN VIETNAMESE COMPANIES
In Vietnamese firms, budgeting is led primarily by the directorate, with directors involved in both budget planning and budget tracking Directors' deep knowledge of the organizational strategy helps ensure budgets align with strategic objectives, and because both strategy and budgets aim to improve performance, alignment translates into better company performance This approach suits Vietnamese small and medium-sized enterprises (SMEs), where directors typically have a broad view of the company and its activities When budgeting for the entire organization, directors can balance resources across activities and departments more easily than when budgets rely on single departments such as production or planning Many companies also rely on the accounting department for budgeting due to its numerical expertise; a combined approach, with director oversight supported by accounting, often works well for SMEs, delivering budgets that are both financially sound and strategically aligned.
43% of companies prepare budget quarterly, 29% do monthly and the rest is doing budget once every 6 months and once a year The frequency of preparing budget,
Budgeting practices in Vietnamese companies, as described by A.O John and L.N Ngoasong (2008), depend on the nature of the business, including factors such as company size, industry, the number of divisions, product lines or business units, management styles, and the organization’s history or culture Because the interview sample consisted of randomly selected firms, the frequency of budgeting varied across companies.
One notable trend among Vietnamese companies is that budgets cover most of their activities, with production and sales taking the largest share at about 76% and 71%, respectively Many firms also budget key cost areas such as raw materials, labor, production costs, and selling costs, ensuring resources are allocated where they matter most This budgeting approach helps them stay aligned with their business development goals.
A survey reveals that 38% of companies use activity-based budgeting (ABB) and 33% use flexible budgeting, while only a small share rely on incremental or fixed budgeting, and none report using zero-based budgeting This finding is striking, given that activity-based budgeting and flexible budgeting are viewed as having advantages over traditional budgeting approaches, which have drawn substantial criticism from many authors.
Small and medium-sized enterprises (SMEs) enjoy greater flexibility in choosing budgeting methods and in preparing budgets They budget more frequently and with greater detail across multiple activities, a practice that can lead to improved organizational performance.
Survey results show that the director and the accounting department share responsibility for budget setting and budget tracking, highlighting how their combined expertise strengthens the organization The director can understand the budget status to shape an appropriate strategy, while both parties monitor the budget by tracking variances and paying attention to deviations from the plan The data reveal that 76% of companies pay attention to all variance between planned and actual results, a practice that can be time-consuming but is well suited for small businesses seeking tight financial control Managing financial resources is vital to a company's survival, and Vietnamese companies, in particular, are still young and have weaker managerial skills compared with foreign competitors.
Vietnamese companies practice budgeting by investigating the reasons behind variances and revising the budget accordingly As the business environment is continually changing, ongoing budget tracking and timely actions are needed to adapt to new circumstances, ensuring the budget stays aligned with strategy and operations This adaptive budgeting approach enhances budget execution and improves the company’s overall performance.
Vietnamese companies regard budgeting as a core management tool for planning and control Data show that 95% use budgets to control costs, and 100% believe budgeting helps save money, a critical benefit for small firms with limited resources Budgets are used for planning activities and setting spending limits, enabling firms to monitor financial health and take timely actions Budget-based performance evaluation is common, and to reach performance targets, budgeting also motivates employees—86% of companies tie rewards to budget performance, underscoring budgeting's practical impact on both organizational performance and individual incentives.
Recent data indicate that the majority of companies believe top management should be involved in budgeting (71%), while only about 33% think functional managers should handle the budget Each approach carries its own advantages and drawbacks For small and medium-sized enterprises (SMEs), top executives can budget for the entire business because they have broad visibility into the overall operations In large organizations, however, top management cannot oversee every function, so involving functional managers in budget preparation is more practical; the resulting budgets are then submitted to top management for approval.
Regular budget revision enhances financial planning and resource allocation In interviews, the majority of companies reported updating their budgets semi-annually, a cadence that suits Vietnamese companies because monthly or quarterly revisions can be costly and disruptive while providing limited added value.
Budget practice tn Vietnamese companies time consuming for small ones This will help company to balance budget within a year, so that to increase the operational management of the company
Data shows that most companies rely on activity-based budgeting and flexible budgeting, which helps them stay responsive and adaptable in a changing environment Traditional budgeting, anchored in historical data, can quickly become obsolete, stifling creativity and delivering little added value, while also making employees resistant to change or innovation Shifting from traditional budgeting to activity-based and flexible budgeting enables organizations to act more decisively in dynamic markets and achieve better business results.
Budget control acts as the standard for evaluating performance and provides an operating plan for the organization over a defined period, guiding how resources are allocated and used It also educates teams to deploy resources most efficiently by setting clear expectations and targets A budget control system enables proactive planning through estimates of expenses, projected sales, and necessary capital, helping the organization forecast needs and manage finances effectively However, budgeting has limitations due to incomplete information and many variable factors that aren’t captured when the budget is prepared.
Budgeting is central to a company’s existence, and clear communication of budget targets is essential to avoid costly failures Data indicate employees understand and generally view their company’s budget as realistic, which boosts motivation to achieve performance targets Many respondents believe that a realistic budget can motivate employees and support managerial decisions, highlighting the budget’s role as a tool for monitoring performance When budgets are well-communicated and used to track progress, they help keep employees on track with the plan and drive toward target achievement.
Budset practice in Vietnamese companies 6.4 IMPLICATION
This study provides an overview of budgeting practices in Vietnamese companies Budgeting is a central aspect of business management because running a company effectively depends on managing its financial resources By examining how Vietnamese firms practice budgeting, managers gain a clear view of the budgeting system and can identify actions to improve budgeting effectiveness In the face of a global financial downturn, understanding Vietnam's budgeting practices helps stakeholders develop strategies to overcome economic challenges.
This study presents a general view of budgeting practices in Vietnamese companies but does not deeply investigate budgeting systems Consequently, it can serve as a foundation for future research on budgeting issues, enabling more actionable recommendations to improve business effectiveness and performance in Vietnam.
QUESTIONNAIRE
Which department in your company is responsible for doing budget?
How often does your company do budget?
What types of budget does your company prepare?
4 What is the budgeting method your company applies?
Budget practice tn Vietnamese compantes Zero base budgeting
Which department is responsible for tracking budget
What are the purposes of budgeting in your company?
How often does your company compare the actual result with budget planning?
What type of variance does your company concern?
What are the actions of your company when there is variance between
Budget practice in Vietnamese compantes actual result and budget planning? o Require employees to be responsible for o Investigate the reason of variance o Revise budget o Do nothing
10 How often your company revise budget? o Monthly o Quarterly o Once every 6 months o Once a year
11 In your opinion, is budgeting of your company realistic? o Yes o No
12 In your opinion, who should be involved in budgeting? o Top management o Functional management o Staff
13 In your opinion, does budgeting in your company help to control cost? o Yes o No
Budgeting difficulties typically involve time-consuming processes, coordination among functions, targets that are too high to achieve, limited information, and many variable factors not included in budgeting, with other issues possible.
Budget practice tn Vietnamese companies
15 In your opinion, does budget planning motivate employees to work?
16 Does your company base on budget plan to pay salary and reward for employees?
17.In your opinion, should the company use budgeting for management purpose? o Yes o No
LIST OF COMPANIES INVOLVED IN STUDY 4l :3932):)20/02000008 B8 aaa1Ạ
Name a ne Business cepa aie
1 company Joint venture planning 150 billion 35
Information technology joint Software stock company consulting and
2 FIBI Joint venture implementing 10 billion 30
3 UHY Limited Limited liability | consulting N/A 100
4 stock company Joint stock Construction 1.8 billion 20
Gia Binh limited Producing pure
5 liability company | Limited liability | water 0.5 billion 30
Budget practice tn Vietnamese companies
6 stock company Joint stock Food 2 billion 170
7 company Joint stock Producing candy | 2.5 billion 100
8 company Joint stock forest food 1.5 billion 50
Anh Duc limited and wrapping
9 liability company | Limited liability | product 4.5 billion 270
10 | liability company | Limited liability | N/A 2 billion 150
II company Limited liability | Produce sweet 3 billion 145
12 | company Limited liability | chocolate 5 billion 120
Equipment kitchen Distributing distributing kitchen
13 | company Private company | equipment 500 million 6
Education and management Hung Viet | Joint stock | solution
16 | company Limited liability | House design 2 billion N/A
Minh Nguyen Constructing and joint stock designing
17 | company Joint stock consulting 2.5 billion 15
Duong Dai | Joint stock | Architecture
Budget practice in Vietnamese companies
[_— | Vimee health 7 Health equipment Joint stock | equipment
21 | Minh Duong Limited Food 8billion 150
Budget practice in Vietnamese companies
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