AAF044-6 Accounting and Finance Sample
1. Introduction
1.1 Introduction
Balfour Beatty is a multinational company in the construction industry. This company has a total revenue of 858.7 crores GBP in 2020 and a total no. of 26000 in 2022. The management of those companies has to maintain proper planning procedures and strategies to maintain their business procedures effectively. This company provides the efficient and innovative infrastructure to maintain their sales percentage and fulfil the demands of their customers. This company also supports the communities and helps in the economic growth of the country. The aim of this topic is to guide the company in the capital investment process and find the issues for the strategic development of the organisational business process.
1.2 Corporate objectives
The corporate objectives of this company are –
- To have zero waste materials in producing their organisational products.
- To improve the sustainability of energy for business development.
- To go Beyond Net Zero Carbon for the organisational development.
- To maintain capital investment appraisal techniques for having better investment.
1.3 Key resources
This company faces different types of issues and risk factors in maintaining their organisational business which affects their business development process. The organisation has a large customer base in the construction industry and a huge no. of employee’s support by which they are able to complete their organisational products in the meantime. Rather than this, the organisation has proper technology and the support of the technical team (balfourbeatty.com, 2019). This experience technical team are able to resolve the technical breakdowns and it maintains the work efficiency of the organisation and the performance of the employees to maintain the quality of their work and the organisation are able to increase the annual profit percentage. However, there are some issues that have been faced by the management team in the capital investment process in this competitive management process.
2. Challenges faced in implementing the system
The continuous budgeting process is an effective way by which the organisational team add one more month at the end of a multi-period after each month goes. This helps them to maintain the financial stability of the organisation and also the management team are able to implement new technologies and effective theories to improve their business process. However, this process needs to be implemented properly and in this case; Balfour Beatty is facing some issues and challenges to run their business effectively. The challenges of this system are mentioned below-
Lack of knowledge
The company has a huge number of employees to run their business but there are employees who do not have a proper overview of in this continuous budget system. However, this is a complex process for which the organisational employees need to be skilled to maintain the proper working process. This creates issues as the planning procedure news to be changed to implement these budgeting proceeds and the employees take much time to understand the responsibilities (Kelly et al. 2019). A sudden change of this budgeting system also affects the work efficiency of those organisations. On the other hand, there is a risk of having issues and blunders in the construction projects for the untrained employees. The employees need to increase several skills and knowledge through training and development proceeds which have the possibility to create mental stress for them. Other than this, this training process also increases the overhead cost of the organisation.
Management attention
This organisation is multiple national companies and had a business through the worldwide process after which the management team have to look after multiple factors and analyse the data to improve their strategies and planning procedure to get competitive advantages. On the other hand, the organisation has a huge number of employees and the management team also have to look after the performance of those employees and provide an effective process to resolve their issues (Askari et al. 2019). In this scenario, this budgeting system needs to have proper attention to maintain every stage of the budgeting process. The organisational needs to be careful and properly managed the budget on the monthly basis to improve their business process. On the other hand, the organisational team needs to use their financial stability to maintain their process to increase the budget of the company and improve the business process. Without having proper attention, the whole infrastructure affects the economic condition of the company and the company might face a huge loss in their organisational process.
Change in working infrastructure
The management of the organisation needs to develop an affecting planning process as this budgeting affects the working infrastructure and the hierarchy news to manage the whole business procedure accordingly. The organisational team analyse the data and information about this budgeting process by which the organisational team are able to improve their business infrastructure (Tang et al. 2019). However, the existing business infrastructure needs to be changed for implementing this budgeting process. However, it affects the employee’s mindset and they need to understand their business-related responsibilities effectively. The collection of data procedure also takes much expense to set this continuous budgeting process according to the organisational business procedure. However, without the right princess of handling, it affects the business development provinces of Balfour Beatty.
Proper leadership process
In this construct industry, various types of leadership processes are there which are able to improve the business process of most of the organisations. However, the management team news to analyse them and select the effective leadership process to maintain their organisational business as well as this budgeting process. However, the management needs to understand the mindset of their employees to guide them for the improvement of their organisational performance through effective procedures (Visvanathan et al. 2018). In this scenario, the management team news to use advanced technologies to understand the characteristics of those employees and choose an effective leadership process which is a time-consuming task. Moreover, the organisation needs to look after multiple situations to maintain its organisational business growth. However, one should have proper knowledge about these various types of leadership to effectively implement in the business process as well as it also helps the organisational team to maintain their business progress. However, the leaders’ also news to keep the budget up to date as the progress of a year and it’s a complex to perform. Rather than this, the accounting or financing mistake in the budget process may affect the financial condition of the business process.
Lack of accuracy
In the process of maintaining the demands of the multinational customers, the organisational management team needs to manage approximately 30-60 files and have folders to maintain their budget system along with fulfilling their demands. In this scenario, of performing such complex tasks there is a common issue that happened is human error. There is a chance of having errors and blunders in the accounting and budgeting process which may lead the company to several losses (Geenen et al. 2020). The lack of accuracy of the employees also impacts the work performance of those employees which may lead to having issues in working infrastructure. As a result, they are unable to complete their organisational tasks in time and fail to meet the organisational performance. However, there is an issue in the case of developing the spreadsheets to manage the information about the budget contributors. In this case, the errors in the spreadsheet create issues in maintaining this continuous budget process.
Technical difficulties
In this market, several budget contributors are there who have different procedures and the company news has several spreadsheets for all of them. However, there are some complex technologies that need to have proper handling proceeds else there is a chance of having technical breakdowns which affect the whole working infrastructure of this company (Lalande, 2018). This is the reason the employees are now focusing on understanding the proper usage and implementation process of these advanced technologies to improve their organisation business and their work performance.
Proper relation
The company has a large number of employees for which the employees may face issues of not having proper communication and relation with their hierarchy. In this process, they are not able to provide support with their skills for business growth. On the other hand, the relationship gap between the management also leads to having miscommunication in this budgeting process and they are unable to proper decisions effectively for maintaining this continued budgeting process. It affects the organisational development process in this competitive market and it affects the annual; earning of the organisation (Ahmad and Ahmad, 2019). These are some issues that have been found through effective research proceeds which affect the organisational business procedure of Balfour Beatty to maintain their annual earning rate in the long run process to gain competitive advantages. The management needs to resolve these issues through effective strategies to improve either business opportunity
3. Critically discuss the usefulness of capital investment appraisal techniques
Figure 1: Capital investment process
(Source: Sokan, 2022)
The capital investment appraisal techniques are payback process, NPV of discounted cash flow methods and internal rate of the return process. The responsibility of this technique is to appraise the new project performance. This process helps the management team maintain the budget of the project. Moreover, this process is a fundamental analysis process that helps the traders to shoe the potential of the company or the business to gain proper annual income in the process of profitability in their future process. Whereas the capital investment process of providing the opportunity to the management team to take effective decision in case of understanding the possible project to invest which provide future development of the financial status of the organisation and the fulfilment of their organisational goals (Sokan, 2022). In this scenario, the organisational team needs to have proper implementation of theories and models to develop effective planning to support their employees’ performance and maintain tier business progress.
This technique provides several benefits to the organisational team about the efficiency of the stock of traders or the potential of the company. It helps the organisation to judge the long-term potential of the company and they are more into having the overview of the profitability about the future projects. The organisational team needs to have proper data about those stocks for which the organisation needs to have a proper analysis process of the management team (Siziba and Hall, 2021). The management team should have an overview of the topic which provides the opportunity to the organisational people to improve their business process in the construction industry.
The information of trade process and the stock play an important role in the capital investment process. The organisation needs to develop their working infrastructure by which they are able to use the capital of the company in a proper investment process to improve their financial stability (RATNAWATI, 2020). In this case, the organization needs to use the support of their employees and their technical equipment to properly maintain the capital investment techniques and provide support to the worldwide customers. Therefore, the organisation needs to analyse the economic feasibility and the effective proceeds such as NPV for the capital investment process. This is a process that acts as assets of the company and they are able to use them in the problematic situation. However, the organisational team have to maintain their working procedure for the competitive scenario on a worldwide basis.
On the other hand, this process needed to have experienced employees for which the organisational team news to proper training process to identify the potential of that stock and to have capital invested for future progress. Balfour Beatty is a company that is more into maintaining the financial part through maintaining an effective budgeting process and in this process; the capital investment plays an important role to improve stability and flexibility which is issues of continuing budgeting process (Alvarez et al. 2021). However, the management needs to identify possible options and have to conduct a cost-benefit analysis process for the further development of such kind of scenario and maintain their business growth through this capital investment appraisal process.
Capital investment is a matter of concern for the companies like Balfour Beatty as management before investing a certain amount of capital into some appraisal techniques; they have to analyze critically the methods. As per the opinion of Akhmetshin et al. (2018), in the capital investment, the management of the company must be sure about its incoming opportunities whereas the risk of not having a return can occur due to improper analysis of the methods. The payback method has handsome features to provide trust on investing capital by Balfour Beatty.
Payback method is generally easy to understand about all of the functions and approaches to the invested amount until the return. As stated by Meijer, and Wessels (2019), this method is simple to use as the company can easily understand the functionalities it does. It can provide a quick solution related to any problems regarding the invested amount by the company. This method generally prefers cash or liquid assets for the investment. The most important matter in this case of capital investment is an uncertainty of having a payback or return where the company can easily invest their capital with this method.
Figure 2: Appraisal techniques
(Source: Meijer, and Wessels, 2019)
Time value of money is ignored in this capital investment appraisal technique of payback method that provides a privilege for the company to invest money. This method is not realistic as well as it does not cover all the cash flows. As stated by Griffin, and Hammond (2019), the investment with the payback method ignores the profitability where the company finds its usefulness in investing their capital with trust. NVP or net present value method can be a good approach to have an alternative for investing a certain amount of capital. This method offers the investors to have unambiguous measures into investments. This accounts for the size of capital investment as it would be easy to have a straightforward calculation with the help of spreadsheets.
NVP or net present value method is not concerned about the net earnings whereas it uses the cash flows for depreciation as in the non-cash items. The usefulness of internal rate of return is nothing but its incorporation with the time value of money for having calculations of the investment and return. It provides simplicity in calculation as well as a way to have maximum profitability with ranking projects (Brynjolfsson et al. 2021). This method works fit and fine with the evaluated factors which are not connected with the required rate of returns.
4. Recommendations
The management of Balfour Beatty is a popular international infrastructure group in UK. As per the opinion of Ojogbo, and Nwano (2019), the management of the organization focuses on effective quality of services in terms of increasing its future projects. There is an effective role of financial analysis in terms of maintaining the availability of materials. The corporate governance code 18 of the UK government has stated that in a firm the non-executive directors need to have time to meet responsibilities and board committees need to have effective knowledge, experience, and skills. Efficient skills are required in the development of an organization. The board of directors in Balfour Beatty has maintained their responsibilities efficiently in terms of expanding its business activities in foreign markets. There are mainly seven directors in Balfour Beatty.
The authority should analyze the factors of corporate governance code 18 in terms of developing their policies. The analysis of revenue and growth of the last 5 years can support the authority in understanding the capabilities of committee members. As per the opinion of Price et al. (2018), committee members and board of directors have different responsibilities and the maintenance of responsibilities can support expanding services effectively. The corporate governance code of the UK has set out different principles that directors of an organization need to apply effectively in terms of promoting future success, values, and purpose of the company. The authority of the organization provides effective services by maintaining quality and certain time periods.
The non-executive directors of Balfour Beatty need to analyze the planning and drawbacks of business activities effectively. In the present scenario, the management of every organization needs to focus on identification of challenges in terms of improving planning and services. The board of directors in Balfour Beatty has maintained their activities and resolved multiple difficulties during expanding their services through their knowledge, skills, and experience (Andreisová, 2018). The monitoring of services can support the management of Balfour Beatty in identifying the capabilities of the board of directors.
The board of directors should provide effective and efficient direction towards success for the company. There is a requirement for effective implementation of policies and ethics on the basis of governance systems (Andreisová, 2018). The board members of Balfour Beatty have managed the financial stability effectively through efficient strategic planning. The analysis of corporate governance code and evaluation of growth and revenue can support the management in identifying drawbacks and developing planning.
5. Conclusion
Based on the above discussion it can be concluded that the board members play a significant role in the development of Balfour Beatty and maintaining their marketing position. The authority of the organization has maintained their services, project activities efficiently in terms of improving opportunities. Policies on the basis of the governance system play a significant role in an organization to maintain business activities. The study has discussed corporate objectives of Balfour Beatty, key resources, challenges faced by the organization, techniques of capital investment appraisal. The capital investment techniques for instance payment method and the method of net present value have been discussed effectively in this study.
Identification of potential challenges can assist Balfour Beatty in improving planning and implementing policies. A healthy relationship among all shareholders is required in terms of improving the market position of the organization. The board members of Balfour Beatty have implemented multiple policies on the basis of the UK governance system to maintain their success. The authority of the organization needs to focus on the corporate governance code of the UK in terms of promoting value, future success, and purpose.
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Websites
Balfourbeatty.com, 2019, Background of the company. Available at: https://www.balfourbeatty.com/ [Accessed on 01.03.2022]
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