- Discussion in the meeting
In the meeting, the key persons of the company were included. This meeting was arranged for 15 minutes. In this meeting, various points are highlighted that should be considered during the preparation of budget. In t this, it is found budgeting is essential for the business because it allows to develop a spending plan on the various aspect of the business. In this meeting, the importance of the budget is discussed. In this, it is found budget is a significant process where companies determine the need of money in the financial year. In this meeting, my idea was about the inflation rate impact on the budget. For my opinion on the budget, I was appreciated buy the budgeting team (Sullivan et al., 2014).
In the meeting, various things are learned as the result of meeting. In this, it is found that budget helps to determine the needs of the money. The preparation of budget helps the company to identify the need of the money in the budget. Furthermore, it is also learned that budget helps identify the approximately profit of the year. It means that the budget help the companies to estimate what profit will in competing period. At the last, it is also learned that budget is essential to maintain the level of the expenditure (Vogel, 2014). For this, it can be learned that how can a company maintain the expenditure.
From the meeting and various topic discussed in this, it can be concluded that budget is a significant financial activity for a business. It helps the company to determine the expenditure as well as the expected income.
- A. Three information sources that would consult to prepare for the winter months
- In order to prepare budget, there is a need to concern on last year sales data
- In order to prepare budget, cafe should concern what product has more demand
- In winder season, the pricing strategy should also consult
- Three measures you would take to deal with the fall in custom
In the fall of customer, below things will considers
- Pricing strategy
- Preference of customer in winter
- Competitor strategy to deal with the fall in customer
In the budgeting process of an organisation, there are various factors that affect the budget. In this, it is found that salary and numbers of employees are main factors that affect budget. In this, it is found that salary of employees increases and decreases the operating cost of the company. The pricing strategy of the company also considered as the main internal factor that affect the revenue of the company. At the same time, the cost of the goods sold also is also an internal factor that affects the budget (Garattini & van de Vooren, 2011).
- B) External factor
External factors refer to some kind of the factors that cannot be controlled by company. In this, it is also found that interest rate is decided by the financial institution and government. A change in interest rate can affect budget. Supplier are also known as the another main external factor of the budgeting. In this, it is identified that a change by the supplier can affect the cost of the company that leads to change in the budget. In the business environment, tax rate is decided by the government and any change in the tax rate can affect the budget.
Methods of overcoming challenges
In the budgeting, there are some internal and some external factors that affect the budget. In this, company can control and overcome the internal factors. For this, company should hire high the skilled and professional person in the financial team that is aware about. At the same time, the company and financial team should be updated on the each concept (Gibson, 2011). It will help to mitigate impact of internal and external factor in budget.
- Draft budget for an organisation
In order to prepare the budget for organisation, the first step is planning of the budget. In this, it is found that the team of the financial department will conduct this activity. In this team, total five employees are involved that includes the one team leader and rest executive. In this, each member get the different responsibility such as one got for data collection, one got for find the supplier rate and market trend, one got the responsibility to identity the other department needs. In the budging process, the behaviour of all the employees and department was found supportive. It is important for achieving the objective of budget. In the budgeting process the role of the each person was valuable (Coates 2014). The leader the team guided at the each step and played an effective role.
- Template of the Various Budgets
|Cash Flow for [Business name] in [Financial Year]|
|Purchases (Stock etc)|
|Advertising & marketing|
|Bank fees & charges|
|Credit card fees|
|Utilities (electricity, gas, water)|
|Rent & rates|
|Motor vehicle expenses|
|Repairs & maintenance|
|Stationery & printing|
|Membership & affiliation fees|
|Wages (including PAYG)|
|Monthly cash balance||$0|
|Variable Cost||Unit Levels of Activity|
|Cost Item||Per Unit||unites||unites||unites|
|Variable Factory Overhead|
|Total Variable Costs|
|Fixed Factory Overhead|
|Total Fixed Costs|
|For the Period of:|
|Salaries & Benefits:|
|Bonus & Commissions|
|Employee Benefits (_____%)|
|TOTAL Salary & Benefits|
|Bank Service Charges|
|Dues & Subscriptions|
|Interest on Debt|
|Other Professional Fees|
|Repairs & Maintenance|
|Seminars & Training|
|Travel & Entertainment|
|Total Other Expenses|
|Total Budget Expenses|
- Types of Budget
Master Budget – A master shows all the activities of the business. It is combination of all the individual budgets. This budget includes the sales budgets, operating expenses, assets and income streams. This budget enables the organisation to establish the business goals and objectives.
Operating Budget – Operating budget allows the organisation to forces the income and expenditure in the financial year. It contains the some significant terms such as sales, production, labor cost, material cost and operating cost.
Cash flow Budget – This budget forecasts on the cash inflow and cash outflow in the business in a time period. It is helpful to manage the cash related activities of the company (Kar et al., 2011).
- Budget variance – Budget variance represents the differences in the actual budget and estimated budget. It is found after the preparation of actual budget.
- Five types of statistic/ information included in budget
- A) Sales
- B) Cost of goods sold
- C) gross profit
- D) Salary and wages
- E) Net profit
- Internal and external factor of budget
- A) Internal factors
- Cost of goods sold
- B) External factor
- Interest rate
- Tax rate
- Five types of information for preparation of budget
- Business plan
- Pricing strategy
- Estimated cost
- Update on the interest and tax rate
- Information related to salary and wages
- In the preparation of the financial budget, it is identified that all the financial information are essential. In this, the financial team seek the various kind of the data such as sales of last year, competitive pricing strategy, interest and taxation rate in the country, cost of the supportive, labour rate, expected sales. But, at the same time, it is also found that there some internal and external factors that can affect budget of the company. In this, the internal factors include salary, pricing strategy and cost of the goods sold. Beside of this, external factors includes the interest rate, tax rate and supplier cost. In the business environment, budget has some significant objectives that are related with the objective of the firm (Grifoni & Messy, 2012). One the budget has prepared in the organisation then it is communicated with the stakeholder of the company such as managers, employees, investors, government, management, and shareholder.
- During the budgeting process, the decision are taken are communicated with three main authorities that are managing director, general manager and CEO of the company. At the same time, the advice of these authorities is considered in the budgeting. Along with this, it is also found that the internal and external factors have the significant impact of the financial activity of the business (Jalil & Feridun, 2011). It is because change in these factors can affect the sales cost and profit. In the organisation, the budget is prepared before the starting of the financial.
- It is analyzed that the actual budget has variance with the estimated budget in the sales, costs and working capital. The actual budget also has variance in the labor cost that is not equal to the estimated budget. In this budget, the available variance needs the significant action to reduce the variance. The organization should focus on the increment of the sales of the company and they also focus on the cost reduction Brodszky et al., 2014). Form the findings, it is analyzed that cost reduction and sales increment is very necessary for providing the actual outcome. The budget report also indicates that the organization use the accounting data in an appropriate manner.
Sullivan, S. D., Mauskopf, J. A., Augustovski, F., Caro, J. J., Lee, K. M., Minchin, M., … & Shau, W. Y. (2014). Budget impact analysis—principles of good practice: report of the ISPOR 2012 Budget Impact Analysis Good Practice II Task Force. Value in health, 17(1), 5-14.
Vogel, H. L. (2014). Entertainment industry economics: A guide for financial analysis. Cambridge University Press.
Garattini, L., & van de Vooren, K. (2011). Budget impact analysis in economic evaluation: a proposal for a clearer definition.
Gibson, C. H. (2011). Financial reporting and analysis. South-Western Cengage Learning.
Coates IV, J. C. (2014). Cost-Benefit Analysis of Financial Regulation: Case Studies and Implications. Yale LJ, 124, 882.
Kar, M., Nazlıoğlu, Ş., & Ağır, H. (2011). Financial development and economic growth nexus in the MENA countries: Bootstrap panel granger causality analysis. Economic modelling, 28(1-2), 685-693.
Grifoni, A., & Messy, F. A. (2012). Current status of national strategies for financial education: A comparative analysis and relevant practices. OECD Working Papers on Finance, Insurance and Private Pensions, (16), 1.
Jalil, A., & Feridun, M. (2011). The impact of growth, energy and financial development on the environment in China: a cointegration analysis. Energy Economics, 33(2), 284-291.
Brodszky, V., Baji, P., Balogh, O., & Péntek, M. (2014). Budget impact analysis of biosimilar infliximab (CT-P13) for the treatment of rheumatoid arthritis in six Central and Eastern European countries. The European Journal of Health Economics, 15(1), 65-71.
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