Plan for invested material instruments

A majority of resources in productive corporations are considered invested instruments.

According to the current Act on Accounting there are three main categories of invested instruments:

 Immaterial essentials;

 Invested material instruments;

 Invested monetary instruments.

Within these three categories, material instruments account for the majority of invested tools.

In terms of creating a business plan the main task is creating a plan for these material instruments. The character of these material instruments – obviously – is determined by the nature of the production. Different tools are needed in a bakery, a mine, in agriculture, or in the light industry. Therefore planning ahead for the demand for resources and for the usage of capacity is a unique task.

Material instruments typically determine the circle, the amount, content and quality of products and services that can be created and marketed. Part of these (for example machines, appliances, and tools) effect human resources and their efficiency directly, while others (for example real estate) have an indirect effect. Creating plans in connection with material instruments is a part of the intermediate (or in some cases long term) planning process. For example creating, expanding or developing the stock of tools, which is part of the innovation and investment plan. At the same time using and applying these tools is a question of operation (Kresalek, 2003)!

During the related planning tasks – which represent in part a wider and in part a smaller portion of tasks than the ones included in the related material of Accounting and Agronomy I courses – the basic goal is to assure the optimal utilization of these tools.

Planning tasks related to material instruments – mainly technical machines and equipment – are to express and utilize the performance capability of these tools. Based on these one can determine the capacity, permeability of the tools as well as the utilization of these characteristics.

6.1.1. The numeralization of capacity

Resources possess a theoretical capacity, which we can call performance or productivity as well. Theoretical capacity is the maximal performance of the resource, which can be achieved in optimal circumstances. The goal of measuring the capacity is to determine the maximum of productivity and to ensure the maximal utilization of technical opportunities to increase profit.

The goal of related calculations is to determine productivity and to ensure that the available opportunities are utilized. On the long term capacities need to be adjusted to the planned tasks. Short term the accessible capacity determines the limit of production. In the latter case the main task of planning is ensuring optimal utilization (Kresalek, 2003; Pupos, 2010).

Capacity can be measured in:

 Natural units (items, kg, t, etc.);

 Agronomical units (ton-kilometre, etc.);

 Measured units (supply days, portion number, etc.);

 Amount of work (norm hour, working hour, working day, etc.);

 Mechanical time input (machine hour, hours of operation);

 Value.

6.1.2. The numeralization of permeability

Next to capacity, which is theoretical productivity, permeability is more decisive as effective, actual capacity, which shows the concrete mechanical – dominating in practice – productivity potential and performance, so it equals the performance in connection with mechanical and economical circumstances that can be planned (Kresalek, 2003). Several sources and practice consider this as capacity and use this as the actual productivity in calculations.

Permeability depends on the number of operating machines, the mechanical, technical quality of equipment, the working order of the corporation, and the potential and achievable quality of workload organization.

6.1.3. Utilization of capacity

Like it was mentioned before, capacity utilization influences the results of a corporation greatly, increases the risk connected to operation because of constant related expenses.

Capacity utilization shows how much the planned performance is being utilized in the time frame of the plan, and it can be numeralized the following way.

capacity 100 Nominal

capacity (%) Used

n utilizatio

Capacity  

6.1.4. Utilization of permeability

The utilization of permeability is used to evaluate the relation between the planned production and the realistically expected and predictable performance. Basically it is the comparison of the demand and coverage of mechanical resources. At the same time during the planning phase one has to consider tasks, that are not part of the production plan, but to complete them machines are needed – this is the revised resource-demand of the production.

Our goal is to have equal production and permeability. If production is higher than permeability, resources are tighter in terms of a given instrument. This can be solved the following ways:

 Increasing the number of machines (including machines not operating before, investment);

 Increasing the average number of shifts, which results in increasing capacity and additional labour force utilization;

 Decreasing the amount of lost time (discipline or organization of work);

 Increasing the average performance rate (learning curve of workforce, increasing proficience);

 Decreasing the machine-related time needed for a product or activity (innovation);

 Hiring paid workers;

 Decreasing the planned volume of production (Kresalek, 2003).

When production is lower than permeability, the given tool is considered a broad production section. This can be solved the following ways:

 Taking up paid work;

 Renting out machines;

 Decreasing the number of shifts;

 Selling machines in good technical condition;

 Sorting out machines that are not in a decent condition (Kresalek, 2003).

The tasks that need to be solved during the planning phase of material instruments were summarized by Pupos (2010):

 The capacity of available material instruments need to be estimated and determined.

 A decision has to be made on the stock (amount) of tools needed and their permeability needs to be determined.

 Creation of the resource-scale, demand needs to be compared with the permeability.

 In case of there is a lack of resources – based on the result of related economic calculations – a decision has to be made about the necessary investment, or one has to find another solution to terminate the deficit. We need to emphasize that – as we will see during the financial planning phase – the selected solution will have a fundamental effect on the financial plan.

 In line with planning the material instruments the workforce as a resource needs to be planned as well. It has to be considered whether the necessary amount of well-qualified workforce is available to operate the instruments.

 In case there is balance between demand and permeability the expenses of operation must be planned. It is the decision making competency of the leadership whether to include the plan for expenses in this phase or in the financial planning phase.