Balance method in planning

The traditional and most common planning method in economics is the balance method, implemented through a system of balance sheets. A balance sheet is a table that compares the availability of resources and their sources with the directions and volumes of use. Balance sheets in the economy perform various functions, are developed for various purposes and are used in various spheres of economic activity: in planning and forecasting, statistics, accounting and analysis of economic activity. Their totality allows us to characterize, combine and balance numerous economic processes and phenomena.

In planning and forecasting, the balance method ensures the linking of needs and resources on the scale of the entire social production, coordination in the development of related industries and industries, ensures proportionality and interconnection of all elements of the national economy. With its help, disproportions are revealed, unused reserves are revealed, new proportions are outlined and justified. Balances used in planning, forecasting can be combined into three groups: material, value, labor.

Material balances characterize the production and use of specific types of products, raw materials, materials (fuel, electricity, metal, etc.), production facilities, equipment, fixed assets, etc. Material balances are developed in physical units, conditionally natural and value terms and consist of two parts: resource, which reflects indicators characterizing resources for all sources of income; and distributive, which characterizes the directions of resource use. These parts must be equal. Material balances are built according to the following scheme.

Material balances are developed at all levels of management – enterprises, industries, regions, countries as a whole to identify the availability of production with raw materials and materials, to determine the material and material proportions in the national economy. In the aggregate of material balances, the following are distinguished: fuel and energy, balance of production capacities, balance of production capacities, balances of machinery and equipment, balances of fixed assets, etc.

Fig. 18. Material Balance Scheme

Fuel and energy balance characterizes the availability, distribution and use of fuel and energy in a country. It is developed both in physical terms and in terms of fuel equivalent. The resource part of the balance reflects the groups and types of fuel and energy resources: natural fuel (coal, oil, gas, waste from logging and woodworking, etc.), natural energy carriers, fuel products (coke, fuel oil, coal and peat briquettes, gasoline, etc.), combustible, by-products of fuel energy, electricity, heat energy (steam, hot water), compressed air. The distribution part reflects the consumption of fuel and energy in the target areas of their use (as raw materials and materials for non-fuel needs, directly as fuel or energy), their losses, release to the side and residues from consumers and suppliers. The balance allows to determine the total size and structure of production and consumption of all types of fuel and energy in the country, to identify the directions of their use.

The balance of production capacities shows the availability of capacities at the beginning and end of the period, the movement (growth, disposal), the level of use of production capacities for the production of specific types of industrial products. It is compiled in physical terms, but in a number of branches of mechanical engineering also in value terms.

The balances of machinery and equipment characterize the total availability of equipment and machinery and their distribution by direction of use.

Balance sheets of fixed assets characterize the reproduction of fixed assets by national economy, industries and forms of ownership. Balance sheet data are important for analyzing reproduction, studying the volume and structure of fixed assets in the national economy, and calculating indicators of the effectiveness of their use. According to them, indicators of depreciation, suitability, renewal, disposal of fixed assets are calculated. Data on the availability of fixed assets are used to calculate indicators of capital intensity, capital-labor ratio, return on capital and other  important economic indicators.

Material balances include balances of land, state resources of grain, potatoes, industrial crops, feed and others.

Value balances are balances reflected in the generation of income across all sources of income and their distribution by uses. They reflect the process of movement of financial resources, economic ties, proportions, the process of formation and use of revenues of the state, enterprises, population in value terms. Value balances include the balance of income and expenditure of the population, enterprises, the state budget, financial, payments, settlement balances and others.

The balance of monetary incomes and expenditures of the population is used to calculate real incomes, purchasing power of the population, supply and demand for goods, as well as to regulate money circulation and the issue of money in the country. It is being developed as a whole in the republic and in its individual regions, as well as in individual groups of the population. It consists of two parts: income and expenditure. The revenue part reflects the income of the population by all sources of income, the expenditure part reflects all areas of expenditure. The balance shows the turnover of money between social groups, the migration of money in the republic. It is developed as part of the planning documents and reflects the balance of monetary incomes and expenditures of the population. Cash income, minus payment for services, payments and savings, consists of purchasing funds of the population,  according to which the volume of retail turnover is determined.

A free balance of financial resources is a consolidated forecast and analytical document, the indicators of which are the basis for decision-making in the field of tax, price, credit policy and especially for the development of the state budget. The financial balance sheet scheme is different from the usual one. It consists of three parts, reflecting the formation, distribution and use of financial resources.

In the system of value balances, a special place is occupied by the payment balance. It is a document reflecting the country’s foreign economic operations for a certain period. The term “balance of payments”  itself was introduced by the Scottish economist of the XVIII century, James Stewart. By the beginning of the twentieth century. in England and the Usa, methods for its compilation were developed in detail, on the basis of which the League of Nations, and then the International Monetary Fund, standardized the methodology and scheme for compiling the balance of payments for all countries. But in many countries, including the Republic of Belarus, the balance of payments is drawn up with deviations from the standard scheme.

Labor balances are a system of consolidated and private balances, which reflects the process of reproduction of the labor force, reveals the availability of labor resources and the need for them by industries, spheres of the national economy,  forms of ownership, allows you to study the composition of labor resources by social groups, to identify labor force reserves. In the Republic of Belarus, labor balances began to be developed since the 50s.

Central to the system of labor balances is the consolidated balance of labor resources. It consists of two parts. The first characterizes the presence and numerical composition of labor resources, the second – the directions of their use in the spheres and branches of the national economy, in types of employment, forms of ownership and social groups with the allocation of urban and rural areas. The balance is developed for the Republic of Belarus as a whole, for regions, districts, which makes it possible to track the scale and directions of population migration. In the system of private labor balances, balance calculations of the distribution of young people through training channels, balances of qualified personnel, jobs and others are distinguished.

The widespread use of the balance method in planning and forecasting is largely based on the use of the basic balance equation, which has the form:

Starting Stock + Sources of Receipt = Directions of Use + End Stock.

The initial stock is usually always known, these are the actual stocks at the beginning of the planning period. The final stock is usually set in the form of a standard. Therefore, knowing the required volumes of consumption of the resource for which the balance is compiled, it is easy to determine the required volumes of production from the basic balance equation. Or vice versa, knowing the volume of production, calculate the planned level of consumption, and if both production volumes and consumption volumes are known, then get the value of the final reserve of the resource.