Financial Budgeting

Financial Budgeting

Section A

  1. 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.

  1. 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
  1. 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
  1. Report

Internal factors

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).

  1. 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.

Financial Budgeting

  1. 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.

  1. Template of the Various Budgets
Cash Flow for [Business name] in [Financial Year]
CASH FLOWAmount
OPENING BALANCE#REF!
Cash incoming
Sales
Asset sales
Debtor receipts
Other income
Total incoming$0
Cash outgoing
Purchases (Stock etc)
Accountant fees
Solicitor fees
Advertising & marketing
Bank fees & charges
Interest paid
Credit card fees
Utilities (electricity, gas, water)
Telephone
Lease/loan payments
Rent & rates
Motor vehicle expenses
Repairs & maintenance
Stationery & printing
Membership & affiliation fees
Licensing
Insurance
Superannuation
Income tax
Wages (including PAYG)
More…
Total outgoing$0
Monthly cash balance$0
CLOSING BALANCE#REF!

 

Flexible Budget
 
Variable CostUnit Levels of Activity  
Cost ItemPer Unitunitesunitesunites
Direct Materials
Direct Labour
Variable Factory Overhead
Indirect Materials
Indirect Labour
Utilities
Other
Total Variable Costs
Fixed Factory Overhead
Supervisory Salaries
Depreciation
Utilities
Other
Total Fixed Costs
Total Costs

 

Operational Budget
For the Period of:
  BudgetedActualVariance
REVENUE:
Sales Revenue
Interest Income
Investment Income
Other Income 
Total Revenue 
EXPENSES:
Salaries & Benefits:
Salary 
Bonus & Commissions 
Employee Incentive 
Employee Benefits (_____%) 
Temporary Labor 
TOTAL Salary & Benefits 
Other Expenses:
Advertising 
Bank Service Charges 
Computer Lease 
Consulting Fees 
Contracted Services 
Dues & Subscriptions 
General Insurance 
Income Tax 
Interest on Debt 
Inventory Purchases 
Legal Fees 
License Fees 
Marketing Materials 
Office Expense 
Office Supplies 
Other Professional Fees 
Payroll Tax 
Postage 
Recruiting 
Rent/Lease Payments 
Repairs & Maintenance 
Seminars & Training 
Telephone 
Telephone Cellular 
Travel & Entertainment 
Utilities 
Vehicle Expenses 
Software Licenses 
Other 
Total Other Expenses 
Total Budget Expenses 

Financial Budgeting

 Section B

  1. 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).

  1. Budget variance – Budget variance represents the differences in the actual budget and estimated budget. It is found after the preparation of actual budget.
  2. Five types of statistic/ information included in budget
  3. A) Sales
  4. B) Cost of goods sold
  5. C) gross profit
  6. D) Salary and wages
  7. E) Net profit
  8. Internal and external factor of budget
  9. A) Internal factors
  • Salary
  • Pricing
  • Cost of goods sold
  1. B) External factor
  • Interest rate
  • Suppliers
  • Tax rate
  1. 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

 Section C

  1. 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.
  2. 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.
  3. 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.

References

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 health17(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 LJ124, 882.

Kar, M., Nazlıoğlu, Ş., & Ağır, H. (2011). Financial development and economic growth nexus in the MENA countries: Bootstrap panel granger causality analysis. Economic modelling28(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 Economics33(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 Economics15(1), 65-71.

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