Robyn Cox
Unit 5 Individual Project
Budgeting: FINA425-1403B-01
American InterContinental University
August 23, 2014
Organizations should prepare budgets with budget control systems in place. The financial planning of the organizations targeted operation is considered budgeting. There are processes that are essential to protecting the financial well-being of the organization. There are challenges that may arise within the organization when implementing a budget and budgetary controls.
What could go wrong? What are three possible risks? Overspending on a budget sometimes can be bad forecasting on part of the budget manager. Incomplete information or just poor forecasting can lead to an underestimation and/or unreal optimism of
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Because the investment specialists have been spending out of control they have made certain areas vulnerable. Marketing supplies, transportation costs and works items are all vulnerable now because of how Money Cares Investment Corporation has been overspending. Out of control spending makes these areas vulnerable because they can substantially increase cost.
Identify the company’s assets? One of Money Cares Investment Corporation asset is that they only have a select amount of employees who depend on modern technology. They also have assets that are their investments, cash in the bank and the cash in their hands. Not to mention equipment, furniture and fixtures along with the building they are occupying. If Money Cares Investment Corporation own any vehicles that will be considered an asset too.
Where is the most money spent? The majority of the spending for this project is done using credit cards. The money is being spent on the marketing supplies, transportation, and workshop items. The money is definitely not being used for investments and promotional aspects. It is obvious that allowance needs to be made for advertising and sales. The investment specialists need to reduce in house spending to bring down the cost of operations. At the rate they are spending the cost of running the business is surpassing the capital investment. The capital investments are the things Money Cares Investment Corporation will need to buy like computers, etc. The
Budget management analysis is used by mangers as a tool and helps determine that all resources available are being used efficiently. The budgets are determined yearly and are based upon the previous year’s budget and variances. This paper will discuss specific strategies to manage budgets within forecast, compare five to seven expense results with budget expectations, describe possible reasons for variances, give strategies to keep results aligned with expectations, recommend three benchmarking techniques, and identify those that might improve budget accuracy, and justify the choices made.
Budgeting itself can be loosely defined as how and where a company’s money will be spent. It mostly consists of deciding the dollar figure amount that will be spent in an area of the company, or for example payroll. This dollar figure, might be very strict and not allow for much give, or it might provide a number that vastly outweighs the true amount that will be spent. Whatever the situation, it allocates a certain amount of money toward that area of the business. To go over would mean that the strategies being used in that area of business are not working, to go under would be the principles are being used effectively. (Bondigas, 2015)
Since a company’s’ budget is typically based on knowledge from their financial history therefore, if a budget variance occurs, it can be because inaccurate estimates were done, or one or more factors have changed unexpectedly, and the company need to make some type of adjustments to their budget. Once a company discovered a significant budget variance, they will need to identify the cause, and address it accordingly. For example,
Ineffective practices in creating and monitoring a budget include failure of management to integrate the operating budget with other planning efforts (Academic Writing Tips, 2011). Organizational leaders should ensure that the long term and intermediate goals correlate with the operating budget. Failure to align the operating budget with various assumptions such as size, scope, and nature of future operations can pose a problem (Academic Writing Tips, 2011). According to Finkler and Ward (2006), upper management and financial officers usually create the operating budget omitting frontline and unit managers. This process can lead to failure in the financial management practices
After carefully reviewing the income statement, balances sheet and cash flow it seems that the company has a negative cash flow for 1998, so even before thinking about obtaining internal and external resources for long term investment, the company must assure resources for their own working capital.
A company's budget serves as a guideline in planning and committing costs in order to meet tactical and strategic goals. Tactical goals such as providing budgetary costs for daily operations, and strategic objectives that include R&D, production, marketing, and distribution are all part of the budgeting process. Serving as a guideline rather than being set in stone, the budget is a snapshot of manager's "best thinking at the time it is prepared." (Marshall, 2003, p.496) The budget is a method in which to reign-in discretionary spending, and will likely show variances between what costs have been anticipated and what costs are actually incurred.
The central challenge that budget developers encounter is predicting what the future holds for the internal business and external factors. Reading the future is something that can never be done with perfect precision. The fast pace of technological change, the complexities of global competition and world events make developing effective budgets both more difficult and more important.
4. Temporarily stop funding your retirement accounts. Use this money to help fund your emergency fund and eventually use to help pay off debt. Once the debt is paid off then start fully funding your retirement accounts again.
A budget can be disadvantageous also. There is judgment and subjectivity in the budgeting process. It does not consider quality and customer service. Budgets can be seen as pressure devices imposed by management, thus resulting in: bad labour relations. Budget could results departmental conflict arises due to disputes over resource allocation, and departments blaming each other if targets are not attained. It is difficult to reconcile personal and corporate goals
Budget formulation and use are tools that guide many decision making strategies in business. The measures that are least effective could create an avalanche of catastrophic events that can negatively impact the decision making strategies. It is in the best interest of the pertinent parties to draft an operating budget based on a collective set of information relating to organizational vision and mission. Ineffective measures can be catastrophic based on the foundation for measures used in creating the budget. Among the many issues organizations face that relates to creating an effective operating budget results from poor
Budget is time-consuming, especially if it involves a poorly managed company. The budget only pays attention to the quantitative aspect of business while neglecting the qualitative aspects. It does not consider the quality of services or goods and therefore inconsiderate of customers’ satisfaction. Another disadvantage of a budget is that it is inaccurate. A firm rarely “makes budget.” The hope is that the business activity will be close to the budget, but it could be off considerably and lead to bad hiring, spending and production decisions. This is because budget preparation is based on assumptions and thereby changes in the business environment could lead to unachievable
Budgeting management plays critical role in organizations, it can help organizations to allocate resource, force thinking about future and estimate performance base on benchmark. Normally, management team and financial function provide budget plans at the beginning of a specific period. It also plays the role of communication and co-ordination around different levels of organization. Although all of kinds of budget are run respectively, it is important to investigate interrelationship between them.
Budget and budgetary control practices though very essential to meeting organizational goals, are mostly hastily and improperly prepared. This eventually leads to unfulfilled budget and budgetary control practices.
• Heavy Administrative Cost Structure: Research shown 14% of the revenue in 2008. Again they need a group of consultant or specialist