Objectives and Benefits of Budgeting in London Docks Cafe

This report discusses the objectives and benefits of budgeting in the context of London Docks Cafe. It covers topics such as structure, cash flow prediction, resource allocation, and performance measurement. It also analyzes the revenues and expenses of the cafe for September and suggests areas of concern for the management. Additionally, it explains the terms profitability and sustainability.

Assessment

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
A. Objectives and benefits of the budgeting in context to London Docks Cafe:.........................3
B. Report which shows revenues and expenses of London Docks Cafe's for the September:....4
C. Which areas of activity should be concern to the management of London Docks Cafe's:.....5
D. The terms profitability and sustainability:..............................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Budgeting is the process of making plans in order to spends money. It is pre estimation of
expenses and income which is used in firms activities. It is the planning, organising, managing
funds according to the pre estimation. It provides roadmap to the employees how they are
generating activities and they creating plans according to this so that they can work efficiently. It
helps managers for overview of activities. It helps for comparing actual performance from
expected performance. The company which is selected for this report is the London Docks Cafe.
It is deals in preparing meals for tourists and citizens. This report covers topics such as
objectives, benefits of budgeting, revenue and expenses variances for the company, concern
about the areas for the management of the company. Apart from this it also covers topics such as
profitability and sustainability (Becker, 2016).
MAIN BODY
A. Objectives and benefits of the budgeting in context to London Docks Cafe:
There are various objectives of the budget which are mentioned below:
 Provide structure: Budgeting provides the structure for the firms activities which has to
done by employees. It gives roadmap to them how they have to utilise the resources. It
shows all revenues and expenses as expected manner. According to its managers provides
the instruction to the employees. It gives structure for activities includes production, HR,
sales department. In context to London Docks Cafe's, It includes terms sales, expenses
includes raw material, wages and salary, utilises, facility rent, insurance, fuel etc. which
gives results as net profit income (de Andrés, de Fuente and Martín, 2015).
 Predict cash flows: Budget helps company it provides direction to it for its activities. It is
useful in those companies which are growing rapidly, which have seasonal sales. This
provides brief about estimating how much cash it requires and periodic cash related
things. It is helps in predicting cash flows for the future.
 Allocate resources: The budget process is tools which helps in deciding where the firms
has to allocate its funds for its various activities including fixed assets purchase. It gives
direction to employees how much they need to spend in specific activity for better
utilisation of resources in order to accomplish business objectives.

 Measuring performance: It helps managers for measuring performance of the employees
while they are work according to estimation. It allows them to better utilisation of
resources. Budgeting helps company for managing funds as per the requirements. It helps
in comparing actual performance from expected performance. By using resources well it
helps in increasing profitability which leads to accomplish its objectives (Downes, von
Trapp and Jansen, 2018).
Benefits of the budgeting for the London Docks Cafe's are mentioned below:
Benefits of Budgeting for London Docks Cafe-
 Better planning- The use of Budgeting is helpful for London Docks Cafe because it can
lead towards better planning. Its use can be made to prepare Short-term, Medium-term
and Long-term plans for the future. Thus in this way the management will be able to
make sure that plans can be applied in the right manner.
 Better efficiency- With the use of Budgeting the management of London Docks Cafe are
able to identify the areas where the efficiency level can be enhanced. In this way the
managers will be able to achieve the goals and objectives in the right manner.
 Manage money : it helps in managing money efficiently as it provides structure of
expenses and revenues. Employees works according to the pre decided manner.
 It allows business to capitalize opportunities.
 It helps firms for identify appropriate growth level and plan for achieving that growth.
 It allows business for anticipating limitations and ways to overcoming from them.
B. Report which shows revenues and expenses of London Docks Cafe's for the September:
This report is based on the company London Docks cafe's which leads for tourists and
citizens. This provides budget for its activities as actual performance and actual performance.
This budget includes expenses and income for the September. It includes revenues and expenses
which includes sales, expenses includes raw material, wages and salary, utilises, facility rent,
insurance, fuel etc.
As per the its budget it shows revenues for the September month as per the planning it estimates
20000 and the actual sales was 18000 the 2000 is the variances for the company it can be reason
for less utilisation of resources. As per the its expenses the actual raw material purchase by the
company is 45000 and expected was 50000 that means firm has less expenses as per its sales.
Firms wages and salary for its employees shows as actual 10000 but the expected was 10500 this

means firm pays less for its employees (Henttu-Aho, 2016). Utilities expenses shows as 3400
actual and 3500 expected performance. The insurance charges actual shows 3200 and the
expected shows 2800 as firm spent more than expected. Fuel consumes by the company actual is
2800 and expected is 2500, it shows firms less efficiency in order to manage its resources. From
its expenses and revenues it shows net operating income generates by the company actual 20100
and expected was 25700. as it shows that actual expenses and revenues are less than expected it
shows less demand of customers which leads to the less sales and decrease in revenues.
Particulars Actual performance
in pounds
Expected performance
in pounds
Variances
Revenues 90,000 1,00,000 -10,000
Expenses:
Raw material 45,000 50,000 -5,000
Wages and salaries 10,000 10,500 -500
Utilities 3,400 3,500 -100
Facility rent 5,500 5,000 500
Insurance 3,200 2,800 400
Fuel 2,800 2,500 300
Net operating
income
20,100 25,700 -5,600
As per the above data it shows less net operating income for the September month which
shows 5600 variance in actual while expected is 25700.
C. Which areas of activity should be concern to the management of London Docks Cafe's:
As per the above variances it shows less sales of the company. Firm should manage its
resources and maintain its marketing so that it can increase its sales. As per the above data it
shows sales is less in the company it can be reason of its service style, environment, prices,
quality etc. as the restaurant business it should take care of these elements for maintaining its
sales. Firm has less sales for the September and it has its variable expenses also less but the fixed
expenses of the firm remain same, it means firm has to increase its sales for maintaining

profitability (O’Grady and Akroyd, 2016). It should covers such areas its marketing area, its
variable charges, food quality, its pricing strategies etc.
 Raw material: company should buy raw material with better quality which makes its
food quality and attract customers for the restaurant.
 Wages and salary: As per the requirements it should hire employees because excess
employees increases its expenses which leads to decrease in profitability.
 Utilities: Firm should take care of its utilities includes maintenance, electricity etc.
because more expenses affects the firms profitability (Rubin, 2019).
 Facility rent: It should use place according to the rent so that it can maintain its
profitability.
 Pricing strategy: Firm should maintain its prices as per the income requirements. Pricing
strategy should be as per the customers needs so that it can satisfied them and makes
business profitable.
D. The terms profitability and sustainability:
Profitability: It is the ability of business which shows profits of it upon its expenses. A
profit is refers to difference between costs and expenses related to the business activities.
Profitability ratios shows metrics which can use to measure the relative profitability of the
company. Expenses refers to money spent by company for running its activities and income
refers to money generated from its activities for the business. Profits has three types operating,
gross, net profits. Firms sales its products on cost plus pricing for getting profitability (Stotsky,
2016).
Cost plus pricing: is pricing strategy in which selling price determined by adding a
specific markup to a products unit cost. Basically cost plus pricing is a simple process of
determining selling price of a product in addition to its cost, it obtains profit. The cost plus
pricing is used in any company to communicate its customers why the price is increases. If
company will increase its selling price,due to rising production cost, the increase can be justified,
and its important for running to an organisation, because its provide the rate of return. It can help
y the organisation how much they need to gain a profit, to understand the value of a product or
service in order to maximize the revenue, and connect with customers willing to pay.
 Operating profit: it is related to the day to day expenses managed by the company and
getting profitability from this. It is done by operating activities of the firm. In context to

London Docs Cafe's, the operating profit for the company is cover less expenses for its
activities in day to day.
 Gross profit: Gross profit refers to difference between sales and cost of goods sold. It is
the profit which can affects net profits of the company. In context to London Docs Cafe's,
gross profit for the company is its difference of its sales by subtracting direct expenses.
Direct expenses includes raw material, labour, overheads.
 Net profit: Net profit is related to the difference of sales and expenses after the tax and
depreciation. It shows actual income for the company which makes its bank balance. In
context to London Docs Cafe's, net profit shows firms net income as which is earn by
subtracting all expenses such as tax and depreciation.
Sustainability: Sustainability is related to the approach for creating long term value by
taking various elements into consideration includes ecological, social and economic
environment. It is built on the assumptions which helps in developing strategies for making
company long period. Sustainability in business is about how long a business runs and strategies
for running it for longer period. Business sustainability is about management and coordination of
environmental, social and financial demands which are responsible for continue success. In
context to London Docs Cafe's, the sustainability is about its business value which helps it to
manage its activities for the longer period. The goal of sustainability is requires more extended
timeline for the return on investments because once investments are made it leads to the increase
in profitability. In today's time technology plays vital role for profitability of business. It
maintain its activities under three bottom line which are environmental, social, financial
opportunities.
CONCLUSION
From the above report it has been concluded that Budgeting is the process of pre
estimation of expenses and income which a company leads for running its activities. It provides
roadmap to the employees how they are generating activities and they creating plans according to
this so that they can work efficiently. Firms compare its actual performance from the budgeted
performance. If the any variances happens in budgeting process it should take steps in order to
fill it. Profitability leads to which company earns from its investments. It is the difference
between expenses and income. Profits has three types includes operating profits, gross profits

and net profits. Business sustainability is about management and coordination of environmental,
social and financial demands which are responsible for continue success. It shows business
values for the long period.

REFERENCES
Books and journals:
Becker, S. D. And et. al., 2016. Budgeting in times of economic crisis. Contemporary
Accounting Research. 33(4). pp.1489-1517.
Bogsnes, B., 2016. Implementing beyond budgeting: Unlocking the performance potential. John
Wiley & Sons.
de Andrés, P., de Fuente, G. and Martín, P. S., 2015. Capital budgeting practices in Spain. BRQ
Business Research Quarterly. 18(1). pp.37-56.
Downes, R., von Trapp, L. and Jansen, J., 2018. Budgeting in Austria. OECD Journal on
Budgeting. 18(1). pp.9-88.
Henttu-Aho, T., 2016. Enabling characteristics of new budgeting practice and the role of
controller. Qualitative Research in Accounting & Management.
O’Grady, W. and Akroyd, C., 2016. The MCS package in a non-budgeting organisation: a case
study of Mainfreight. Qualitative Research in Accounting & Management.
Rubin, I. S., 2019. The politics of public budgeting: Getting and spending, borrowing and
balancing. CQ Press.
Stotsky, M. J. G., 2016. Gender budgeting: Fiscal context and current outcomes. International
Monetary Fund.