HR7003 Assignment Sample
Executives Summary
This report has made discussion about the budgeting related to London Docks Café. It is café which involved in the business of providing meals to the tourists and citizens and it is also situated near the local airport. From the budgeting analyses, it is learnt that the café has done the budgeting process and given the data for the actual and budgeted figures. The café has more spending as compare to planned budget which is one of the drawbacks to add expenses to firm. Apart from this, the expected selling of meals is also reduced by 2000 as per planned budget. But overall budget does not indicate any loss for café but even no profit as well. That’s why; café is suggested to focus on its profitability and sustainability aspects to continuing its journey for longer-period of time
A. Meaning of Budgeting
From the concept of budgeting, it is understood that budgeting is an important task for business as it guides about the expenses and income to business. This guides them to make present and future decisions. Budgeting is simply balancing expenses and income of firm. Basically, budgeting is a financial plan which is made for defined period of time majorly one year. It may also include planned sales volumes and revenues, resources quantities, costs and assets or cash flows. The budgeting practice helps in multiple manners from identifying variances to make action plan for reducing the variances in future (Baiocchi & Ganuza, 2014). These all areas can be done with the help of budgeting.
There are five steps that commonly undertaken in the preparation of budget
- Step 1: automate essential, recurring living expenses
- Step 2: automate savings
- Step 3: establish a debt reduction plan
- Step 4: analyze the spending plan
- Step 5: account for irregular expenses
Objectives of budgeting process
Allocation of funds
It is the major objective of budgeting as allocation of funds are important for business as with the estimation of cost. It would be easy to figure out what actual cost investment is required in particular project.
Decision-making
Budgeting also have objective behind to identify the right decisions which tend to be taken based on the income and expenses. This helps the firm to cut down the expenses so that income can be maximized (Lane & Kerins, 2014).
Profit attainment
The budgeting also helps to enhance the profit margin through make right planning about the activities and allows to implementing as per the budget. This helps to reduce the chances of failure.
Benefits of budgeting process when applied on London Docks Café
The budgeting process brings lot of benefit for London Docks café in the following ways:-
Budget compels planning:- all business activities require some planning for ensuring efficient and maximize use of available resources. The budgeting is a detailed schedule of the proposed combination of various factors which guides the financial manager about what to invest and what could give more benefits.
Budget improve coordination:- It is known that today’s time organization can’t solely depend upon the single tools. Likewise, exposure of online media also demands for the business to deal with online channel as well. In that case, budget helps to maintain coordination between different activities. Likewise, London docks café can also able to bring coordination within its offline and online delivery system.
Budget support to cost control:- Today’s touch competitive environment to be present in all factors such as production, to quality check to distribution to consumers. In that case, budget guides that how much need to spend in each of the areas and what kind of benefit can be gathered after it (Keillor & Wilkinson, 2011).
Thus, these aspects clearly provide support to the café in regards to make right decision after analyzing its December budget.
b.Report showing London Dock’s Revenue & Spending Variance for the month ended 31st December, 2020
| Particulars | Static Planning Budget | Actual Resullts | Flexible Budget | Revenue & Spending Variance | Adverse(A)/ Favourable (F) | |
| Budgeted meals quantity | (q) | 20,000.00 | 18,000.00 | 18,000.00 | ||
| Revenues (£5.00q) | 1,00,000.00 | 90,000.00 | 90,000.00 | – | ||
| Expenses: | ||||||
| Raw material (£2.50q) | 50,000.00 | 45,000.00 | 45,000.00 | – | ||
| Wages and salaries (£5 500+£0.25q) | 10,500.00 | 10,000.00 | 10,000.00 | – | ||
| Utilities (£2 500 + £0.05q) | 3,500.00 | 3,400.00 | 3,400.00 | – | ||
| Facility rent | 5,000.00 | 5,500.00 | 5,000.00 | 500.00 | A | |
| Insurance | 2,800.00 | 3,200.00 | 2,800.00 | 400.00 | A | |
| Fuel | 2,500.00 | 2,800.00 | 2,500.00 | 300.00 | A | |
| Net Operating Income | 25,700.00 | 20,100.00 | 21,300.00 |
From the above, it has been calculated as;
Revenue Variances= Nil
Formula:-
(Spending Variance= Raw material variance+ Wages & Salary Variance + Utilities Variance + Facility Rent Variance + Insurance Variance + Fuel Variance)
= Nil + Nil + Nil + 500(A) + 400(A) + 300(A) = 1200 (A)
c.Area of activity on which management should have a concern
On the basis of above report, it has been learnt that the budget has been given for 20000 units while the actual meals is 18000 only. At the same time, flexible budget has been prepared taking into consideration the actual meals produced which is 18000 meals.
The calculation of variances shows that company is having nil revenue variance which tend to be indicated that the business is selling the meals at the same rate as budgeted.
The analysis in the case of meals delivery, it is realized that there is variance of 2000 between planned and actual budget. This is not a good sign for the firm profitability. This is because café is not making sell which they have planned. That’s why; it is must to figure out the right way to deal with such differences.
London Docks café need to make changes in its advertisement as it is not supporting them to turns into making sells. That’s why; digital content marketing would be suitable tool to bring more awareness among the tourist. This is because those tourists who have layover in airport always prefer to order food near restaurant to airport. That’s why, café need to make right content for marketing (Lucey, 2009).
It is known that online services are high in demand especially for tourist. The take away or online delivery would be essential to adapt for getting more people attention towards café.
The budget also revealed the spending variance that is 1200. It indicated that the actual expenses are more than as budgeted. this is not a good sign for the firm as spending more as per planned budget would result into high expenses then this could cover profit margin of company. It exactly happens in the case of café where it has high expenses due to having different of 1200 in spending. That’s why; it is must for firm to focus on the spending of firm. The high spending would be well enough if firm cover that expenses and turn into profit. But here café is failing in doing that.
The procurement of raw material is equal as per the planned budget. It indicate that café is doing well in the part of optimally utilize of available resources but still it need to improve its sales.
d. Profitability and Sustainability
According to Trujillo‐Ponce (2013), profitability is defined as a measurement of efficiency and ultimately success or failure. It indicates a business ability to produce high rate on investment based of resources in comparison with an alternative investment. Profitability calculation is also important as it guides the firm about the expenses and requirement to take strict actions for covering the profit margin. For companies, profitability is an important part as investors only attract based on profitability of firm. That’s why, profitability considered as a much vital factor in present scenario where business thrive for it.
As per the study of Benson & Craig (2014) sustainability can be coined as a process where business able to gain competences to survive in competitive market. The sustainability is also important in today’s scenario where environmental issues and absences of ethics in society. That’s why, the actions of sustainability is important for long-term benefit to company. Therefore, sustainability is made up of three pillars. It includes economy, society and environment. These principles are also informally used as profit, people and planet.
Measures London Docks Café should adopt to ensure the attainment of both mandates
After getting knowledge about sustainability and profitability, it is realized that both variables are dependent on each other as without profitability, sustainability of business is impossible. That’s why; it is must to apply both the terminologies properly on London docks café.
The café should be taken a sustainable approach in its café through invest in renewable resources as well eco-friendly packaging. Such activities support to reduce waste in such manner it would lead to less pollution in the environment and hence protect society at large. When the café would take such sustainable initiatives, it will lead to achieve the profit in the better way.
Sustainability and Profitability can be obtain by the café through ban plastic packaging and promote optimal utilization of food and avoid to waste of food through supply to underprivileged people .The café would get the sustainable development and would be able to achieve the goals and objectives of the business. This resulted into capturing long-term benefits in its business through achieve cash-inflows (Thiele, 2016). At the same time, the use of advanced technology such as self-checkout system or online tracking order would also support to provide right customer services to customers and help the café to reduce the staff expenses at maximum manner. Besides that, the focus on the part-time staff would also be good for café as it already have permanent employees, chefs and managers. In case of delivery system, Café can do two things first tie-up with any particular supplying agency or either hires students who are ready for part-time job. This kind of area also helps to reduce the expenses to staff members. It is because permanent employees are always liable for taking many benefits from the firm. In that case, part-time job offer would help to work done and at the same time support to make less investment over the designing of incentives or providing different schemes to them. This step somewhere helps the café to control cost and enhance profitability.
References
Baiocchi, G. & Ganuza, E., (2014). Participatory budgeting as if emancipation mattered. Politics & Society, 42(1), pp.29-50. Retrieved from: https://digital.csic.es/bitstream/10261/90027/1/Baiocchi%20and%20Ganuza%20Politics%20%20Society%20postprint.pdf
Benson, M.H. & Craig, R.K., (2014). The end of sustainability. Society & Natural Resources, 27(7), pp.777-782. Retrieved from: https://www.tandfonline.com/doi/abs/10.1080/08941920.2014.901467
Keillor, B. & Wilkinson, T., (2011). International business in the 21st century. Santa Barbara, Calif.: Praeger. Retrieved from: https://products.abc-clio.com/ABC-CLIOCorporate/product.aspx?pc=A2020C
Lane, J. & Kerins, F., (2014). Middle Border States: Higher Education in Idaho, Montana, North Dakota, South Dakota, and Wyoming. Higher Education in the American West: Regional History and State Contexts, p.99. Retrieved from: https://books.google.co.in/books?hl=en&lr=&id=yH-EAwAAQBAJ&oi=fnd&pg=PA99&dq=2014.+North+Dakota%27s+budgeting+process.+%5BBismarck,+N.D.%5D:+North+Dakota+Legislative+Council.+&ots=jsuApBHQrI&sig=r7YnUN6eF92Q7ohJUqBkKSzbaLQ&redir_esc=y#v=onepage&q&f=false
Lucey, T., (2009). Costing. Australia: South-Western Cengage Learning. Retrieved from: https://www.scirp.org/(S(i43dyn45teexjx455qlt3d2q))/reference/ReferencesPapers.aspx?ReferenceID=1194307
Thiele, L., (2016). Sustainability. Cambridge: Polity. Retrieved from: https://www.scribd.com/doc/316059433/Wilkinson-T-J-Kannan-V-R-Strategic-Management-in-the-21st-Century
Trujillo‐Ponce, A., (2013). What determines the profitability of banks? Evidence from Spain. Accounting & Finance, 53(2), pp.561-586. Retrieved from: https://www.researchgate.net/publication/227670309_What_determines_the_profitability_of_banks_Evidence_from_Spain#:~:text=One%20of%20the%20main%20variables,2013)%20%5D.%20
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