Budgetary Forecasts: Cash Budget and Profit Budget Forecast

This document discusses the importance of budgetary forecasts in financial management and provides a step-by-step guide on how to prepare a cash budget and profit budget forecast for Cardiff Central Hotel. It explains the inflow and outflow of cash, potential sources of income and expenses, and estimated profits for the organization. The cash budget shows a steady rise in room sales and constant expenses, while the profit budget forecast helps in evaluating the chances of profit generation and maintaining overall expenditures.

BUDGETARY FORECASTS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
TASK 1............................................................................................................................................3
Cash Budget.................................................................................................................................3
TASK 2............................................................................................................................................7
Profit Budget Forecast.................................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Budgetary forecasts are a key in the overall management of the financial capacities in an organisation and the overall utilisation of the
finances that are available (DeFranco and Schmidgall, 2020). The budgetary forecasts help in overall maintenance of the inflow as
well as outflow of the cash and the overall expenses that are taking place in an organisation. In this report, a cash budget will be
prepared for the Cardiff Central hotel which will detail all the potential sources of income and expense and all also the net balance that
is available in the organisation (DeFranco and Schmidgall, 2017). Further the report will also identify the profit budget forecasts for
the company so that value of estimated profits can be ascertained for the organisation.
MAIN BODY
TASK 1
Cash Budget
Cash budget mainly indicates the inflow and outflow of the cash within a fixed accounting period and helps in maintaining a proper
record of the different transactions that are taking place (Bhar, 2019). The cash budget mainly indicates a net cash inflow of a
company form a variety of sources and at the same time, it also indicates the net cash outflow from the company ( EQUIVALENTS,
2018). This is instrumental in taking key decisions for the company as the cash budget basically illustrates the liquidity of a company
and this can be of ultimate help in the long term for the company (Turner, 2016). For Cardiff Central hotel, the cash budget for the
period of year2019- 2020 can be developed in following manner:
Jan Feb March April May Jun July Aug Sept Oct Nov Dec Total
£ £ £ £ £ £ £ £ £ £ £ £ £
Receipts :
Room Sales 122,62
5
126,92
5
134,750 143,5
75
147,12
5
167,
500
218,56
0
244,04
0
219,41
5
194,83
0
148,1
55
116,055 1,983,5
55
Food &
Beverage
44,500 40,100 43,300 42,60
0
40,200 36,5
00
45,300 44,800 37,700 28,900 38,00
0
51,000 492,900
3

Rent 950 950 950 950 950 950 950 950 950 950 950 950 11,400
Commission 25 55 20 15 10 40 25 35 30 45 50 35 385
Total
Receipts
168,10
0
168,03
0
179,020 187,1
40
188,28
5
204,
990
264,83
5
289,82
5
258,09
5
224,72
5
187,1
55
168,040 2,488,2
40
Payments :
Laundry 6,250 6,250 6,250 6,250 6,25
0
6,250 6,250 6,250 6,250 6,250 6,250 68,750
Rates 21,66
8
5,417 5,41
7
5,417 5,417 5,417 5,417 5,417 5,417 65,004
Printing and
stationary
2,000 2,000 2,000 2,000 2,900 2,00
0
2,000 2,000 2,000 2,000 2,900 2,000 25,800
Wages 11,667 11,667 11,667 11,66
7
11,667 11,6
67
11,667 11,667 11,667 11,667 11,66
7
11,667 140,000
Toiletries 46,000 46,000
Salaries 110,
000
110,000 220,000
Marketing
cost
60,0
00
60,000
Lighting and
heating
27,500 27,5
00
27,500 27,500 110,000
Payment
towards
suppliers
0 2,000 12,300 2,000 16,400 2,00
0
2,750 2,000 2,000 3,500 2,000 2,000 48,950
Petrol &
diesel
1,000 1,000 1,000 1,000 1,000 1,00
0
1,000 1,000 1,000 1,000 1,000 1,000 12,000
Restaurant
Improvements
8,800 22,0
00
13,200 44,000
Van 28,000 28,000
4

General
Maintenance
charges
5,000 5,000 5,000 5,000 5,000 5,00
0
5,000 5,000 5,000 5,000 5,000 5,000 60,000
Total
payments
19,667 73,917 102,517 49,58
4
48,634 252,
834
34,084 46,534 60,834 34,834 34,23
4
170,834 928,504
Balance b / f 265,00
0
413,43
3
507,547 584,0
50
721,60
6
861,
257
813,41
3
1,044,1
65
1,287,4
56
1,484,7
17
1,674
,609
1,827,530 1,824,7
36
Net cash
flow in
month
148,43
3
94,113 76,503 137,5
56
139,65
1
(47,8
44)
230,75
1
243,29
1
197,26
1
189,89
1
152,9
21
(2,794) 1,559,7
36
Balance c / f 413,43
3
507,54
7
584,050 721,6
06
861,25
7
813,
413
1,044,1
65
1,287,4
56
1,484,7
17
1,674,6
09
1,827
,530
1,824,736 3,384,4
73
CALCULATION
Nov Dec Jan Febr
uary
Marc
h
Apri
l
May June July August Sept Oct Nov Dec
Room sales 123000 10800
0
130,500 125,0
00
140,00
0
145,
500
148,00
0
178,00
0
240,40
0
246,00
0
205,1
00
189,300 126,000 110,70
0
Food &
beverage
36000 47000 44,500 40,10
0
43,300 42,6
00
40,200 36,500 45,300 44,800 37,70
0
28,900 38,000 51,000
Rent 950 950 950 950 950 950 950 950 950 950 950 950 950 950
Commission 120 15 25 55 20 15 10 40 25 35 30 45 50 35
Room Sales
Business 37800 4567 43750 4900 50925 51800 62300 84140 8610 71785 66255 44100
5

concerns
35%
5 0 0
Individuals 84825 8125
0
91000 9457
5
96200 115700 156260 159900 1333
15
123045 81900 71955
Collection
from sales
122625 1269
25
13475
0
1435
75
147125 167500 218560 244040 2194
15
194830 148155 11605
5
Payment to
Suppliers
Jan Feb Mar Apri
l
May June July Aug Sept Oct Nov Dec
In room
beverages
2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000
Kettle trays 1500
Bedding
bundles
700 750
Complimenta
ry items
9600 14400
Total 0 2000 12300 2000 16400 2000 2750 2000 2000 3500 2000 2000
The cash budget prepared above clearly indicates that the overall cash forecast that has been prepared indicates that the overall
cash projection for Cardiff Central hotel has been seen to be categorised as positively skewed (Abor, 2017). The cash budget is in
clear indication that the net room sales are expected to depict a steady rise in the income over the period of 12 months and this can be
mainly attributed to the aspect that the hotel industry is a major tourism attraction sources and hence the sales of the hotel tend to rise
substantially (Mwanza and Benedict, 2018). There has been some constant expenses in the Cardiff Central hotel where the Laundry,
Printing and stationary, General Maintenance charges, petrol and diesel, rates and wages etc. are evidently constant in nature i.e. they
are constantly rising together (Picchio and Santolini, 2020). This shows that these expenditures are of fixed nature i.e. they are bound
to incur whether sales decline or sales increases instrumentally (Shaaban and Thandra, 2016). However, on the other hand it is also
evident that there are some other expenses that are not regular such as expenses in toiletries, marketing and promotional costs, supplier
6

payments, investment in restaurant improvements, investment in fixed assets such as van etc. these are of occasional nature and the
hotel tends to incur them only when they are in a good profitable situation collectively (Zietlow, 2020).
Apart from this, the prepared cash budget also indicates that the cash net flow for Cardiff Central Hotel seems to be constantly
raising till the month of November where it reaches the amount of £ 1,827,530 and then it shows a slight decline in the month of
December when it reaches the amount of £ 1,824,736. This indicates that the company might be having a slow down due to festive
season where people prefer going to home rather than the hotels and the staff is also comparatively shorter (Penkovskya, 2019).
Collectively, it can be evidently ascertained that the cash budget and its preparations is instrumental in the overall ascertainment of the
net profitability of the company and it also resolves or rather facilitates the decision making of the hotel management (Sokolov, 2019).
For instance, in this case the hotel management of Cardiff Central hotel was able to identify that they had spare investment
possibilities and these could be done satisfactorily in the form of buying a van which is essential for their quicker services ( Yılmaz,
2018). Similarly, it can help in future decision making for the Cardiff Central hotel as well.
TASK 2
Profit Budget Forecast
The preparation of profit budget forecast is mainly done in order to ascertain that whether the organisation will be in a profitable
situation or not i.e. the potential sources of profit as well as loss generation that are possible in the company are ascertained in the
form of the profit budget forecast (West and Ries, 2018). It is prepared systematically where all the potential sources of revenue are
taken into consideration and these are then compared to the all possible expenses in the given time period (Neilsen, 2020). This then
helps in indicating that if the revenue is more than income then the difference between the two is positive showing profit and if the
revenue is less than potential expenses then the difference is negative indicating the losses (Peters, Gudergan and Booth, 2019). In this
manner, any company can evaluate that what are the chances of profit generation and by what estimated amount. This can further help
the company in maintaining its overall expenditures and trying to eliminate or reduce them if the expected revenue is not to the par
7

(Choi, 2016). This therefore acts as of instrumental importance in the overall decision making and financial maintenance of the
organisation.
In the current case of Cardiff Central hotel, the profit cash budget can be prepared for the hotel for a period of January 2020 to
June 2020 based on the different expense and income information that is given about the company (Gilchrist, 2018). This can be
prepared in a following manner:
Profit budget forecast as on 30th June, 2020
Jan Feb Mar Apr May Jun
Room sales 130,500 125,000 140,000 145,500 148,000 178,000
F & B sales 44,500 40,100 43,300 42,600 40,200 36,500
Total sales revenue 175,000 165,100 183,300 188,100 188,200 214,500
Rental Income 950 950 950 950 950 950
Commission Income 25 55 20 15 10 40
Total Revenues 175,975 166,105 184,270 189,065 189,160 215,490
Expenses
Salaries 18,333 18,333 18,333 18,333 18,333 18,333
In room beverages 2000 2000 2000 2000 2000 2000
Complimentary items 2000 2000 2000 2000 2000 2000
Bedding bundles 700
Printing and stationary 2,000 2,000 2,000 2,000 2,900 2,000
Laundry 0 6,250 6,250 6,250 6,250 6,250
Wages 11,667 11,667 11,667 11,667 11,667 11,667
Toiletries 3,833 3,833 3,833 3,833 3,833 3,833
Petrol and diesel 1,000 1,000 1,000 1,000 1,000 1,000
8

Marketing cost 5000 5000 5000 5000 5000 5000
Lighting & heating 9166.7 9166.7 9166.7 9166.7 9166.7 9166.7
General Maintenance 5,000 5,000 5,000 5,000 5,000 5,000
Depreciation of van 416.7 416.7 416.7 416.7
Depreciation of minibus 333.3 333.3 333.3 333.3 333.3 333.3
Rates 5416.7 5416.7 5416.7 5416.7 5416.7 5416.7
Total Expenses 65750 72000 73116.67 72416.67 73316.67 72416.67
Profit 110,225 94,105 111,153 116,648 115,843 143,073
The above Profit budget forecast prepared for the Cardiff Central hotel clearly indicates the expected profitability of the company
(Finkler, Smith and Calabrese, 2018). It has been forecasted that the sales of the company tend to rise from the initial amount of only £
110,225 in the month of January, 2020 to the amount of an estimated £ 143,073 in the end of June, 2020. This indicates that the
potential sources of income for the Cardiff Central hotel are more than the sources of expenses and the company is operating in a well
balanced manner. The major revenue for the hotel is from its room as well as restaurant sales i.e. food and beverage related sales
(Zhao and Khazaei, 2016). This is mainly due to the fact that these are the key aspects on which majority of investment and
maintenance expenses are made in a proportionate manner (Pitkänen, 2016). It can also be concluded that the expenses of the hotel are
very well balanced and proportionately distributed.
CONCLUSION
The research conducted in the report above helps in concluding that the preparation of a cash budget is indeed a necessary aspect
in the overall budgetary forecasting for a company. The cash budget prepared for the Westhorpe Leisure Investments Ltd. where the
overall cash inflow i.e. net flow is expected to increase. It was also concluded that the overall profit budget forecast for the company is
shows a steady increase. Thus these acts as a positive aspects for the company collectively and can hugely assist the company in
taking better decisions related to financial capabilities and the overall operational efficiency of the company can rise.
9

REFERENCES
Books and Journals
Abor, J.Y., 2017. Financial Planning and Forecasting. In Entrepreneurial Finance for MSMEs (pp. 199-224). Palgrave Macmillan,
Cham.
Bhar, A.K., 2019. Design & implementation of a personal Cash flow program using Microsoft Excel®. Global Journal of Business,
Economics and Management: Current Issues, 9(1), pp.29-40.
Choi, T.M., 2016. Multi-period risk minimization purchasing models for fashion products with interest rate, budget, and profit target
considerations. Annals of Operations Research, 237(1-2), pp.77-98.
DeFranco, A.L. and Schmidgall, R.S., 2017. Cash Budgets, Controls, and Management in Clubs. The Journal of Hospitality Financial
Management, 25(2), pp.112-122.
DeFranco, A.L. and Schmidgall, R.S., 2020. Are We Keeping Our Cash in Our Hotels?. Journal of Hospitality Financial
Management, 28(1), p.7.
EQUIVALENTS, C., 2018. CASH & CASH EQUIVALENTS. BALANCE SHEET.
Finkler, S.A., Smith, D.L. and Calabrese, T.D., 2018. Financial management for public, health, and not-for-profit organizations. CQ
Press.
Gilchrist, R.R., 2018. Managing for profit: The added value concept. Routledge.
Mwanza, P.S. and Benedict, H.O., 2018. Journal of Entrepreneurship & Organization Management.
Neilsen, A., 2020. Budget blitz. Ragtrader, (May 2020), p.33.
Penkovskya, E.V., 2019. ECONOMICS OF SOCIAL AND LEGAL CULTURE OF SOCIETY IN THE XXI CENTURY. In Роль
интеллектуального капитала в экономической, социальной и правовой культуре общества XXI века (pp. 24-26).
Peters, M.D., Gudergan, S. and Booth, P., 2019. Interactive profit-planning systems and market turbulence: A dynamic capabilities
perspective. Long Range Planning, 52(3), pp.386-405.
10

Picchio, M. and Santolini, R., 2020. Fiscal rules and budget forecast errors of Italian municipalities. European Journal of Political
Economy, p.101921.
Pitkänen, A., 2016. Cash Flow Forecasting: Proposal for New Long-Term Cash Flow Forecast in the Case Company.
Shaaban, A.F. and Thandra, V., 2016. System and Method for Budgeting and Cash Flow Forecasting. U.S. Patent Application
14/788,779.
Sokolov, I., 2019. Federal Budget for 2020–2022: Main Parameters. Monitoring of Russia's Economic Outlook. Moscow, (16), pp.5-8.
Turner, J.A., 2016. Net Operating Working Capital, Capital Budgeting, And Cash Budgets: A Teaching Example. American Journal
of Business Education (AJBE), 9(1), pp.31-38.
West, A. and Ries, R., 2018. Top challenges facing not-for-profit CFOs today: Revisiting the toughest challenges. The CPA
Journal, 88(4), pp.15-17.
Yılmaz, F., 2018. Budgeting as a Tool for Sustainable Development. In Handbook of Research on Supply Chain Management for
Sustainable Development (pp. 42-60). IGI Global.
Zhao, Y. and Khazaei, H., 2016, July. An incentive compatible profit allocation mechanism for renewable energy aggregation. In 2016
IEEE Power and Energy Society General Meeting (PESGM) (pp. 1-5). IEEE.
Zietlow, J., 2020. 10 Treasury, Cash, and Liquidity Management in Nonprofit Organizations. Financing Nonprofit Organizations.
11

12