Detailed Analysis Report: FNSACC513 Manage Budgets and Forecasts

This report provides a comprehensive analysis of budgeting and forecasting, covering key aspects such as cost reduction, departmental unification, and revenue generation. It outlines the objectives of budgeting, including financial year revenue projections and expenditure estimations, while also addressing potential future problems and changes. The report explores assumptions and parameters, including past company performance, industry publications, customer activity, and supplier behavior. It delves into the steps for realistic cash flow management, detailing various financial risks like liquidity, speculative, strategy, credibility, and economic risks. Additionally, it discusses protection strategies for mitigating these risks, such as avoidance, risk mitigation, and transfer of risk. The report also examines two major budgeting types: incremental-based budgeting and activity-based budgeting, along with their respective formats and feasibility in relation to sales growth and company structure. Finally, the report includes a bibliography of relevant sources.

BUDGETING
ANANLYSIS
TOTAL OVERVIEW OF BUDGETING

o The budgeting plan assists the company to reduce the cost that
are mainly associated with the company’s everyday operation.
o It also assists the company to unify all the departments of the
company.
o It assists the company to generate the revenue from the
market.
o It also helps the company to increase the performance of the
company.
OBJECTIVES OF BUDGETING

o The budgeting system enables the company to gauge the amount of
money they can generate from the market in the specific financial
year.
o The company also gets an idea of total expenditure that the company
going to generate in that financial year.
o Analyses the problem that the company may see in future.
o The company also consider the change that may arise in future.
ASSUMPTIONS AND PARAMETERS

o The past performance of the company needs to be reviewed.
o The company also needs to consider the industry publications.
o The customer’s activity of the company.
o Behaviour of the supplier.
o Sales growth of the company.
STEPS TO BE FOLLOWED FOR REALISTIC CASH FLOW

The different types of financial risks are as follows;
o Liquidity Risk: The company needs to be concern about the liquidity of
the assets and securities, so that the current liabilities can be meet.
o Speculative Risk: The company needs to speculate accurately, so that
the company can generate more amount from the market.
o Strategy Risk: Strategy risk is the kind of risk that the companies faces
specially while creating the budgeting plan for the company.
o Credibility Risk: The company needs to continue the ethics based
operation to maintain the credibility of the company. If not happens then
the company might face the credibility risk.
o Economic risk: The ever changing market creates a considerable amount
of risk for the company, which is known as economic risk.
TYPES OF FINANCIAL RISK

The different types of protection strategy for mitigating the risks are as
follows:
o Avoidance risk: The best strategy for managing the risks is to avoid the
risks by not engaging in risky projects or risky operations.
o Risk Mitigation: When the risks are unavoidable then the management of
the company needs to opt for this strategy. In mitigating risks the company
needs to reduce the negative consequences.
o Transfer of Risk: The company usually uses the transfer of risk by paying
premium for insurance. This insurance safeguard the company from any
kind of hazards.
PROTECTION STRATEGY

The two major types of budgeting are as follows:
o Incremental based Budgeting System: In incremental budgeting the
company considers the last year budgeting and develop the budgeting
plan. The plan also considers the previous year performance of the
company and the present market structure of the company.
o Activity Based Budgeting: Activity based budgeting system is one of the
most common type of budgeting system that the companies adopt. This
budgeting system is useful when the company deals with more than one
type of product.
TWO MAJOR TYPES OF BUDGETING FORMAT

INCREMENTAL BUDGETING PLAN

ACTIVITY BASED COSTING

The feasibility of the budgeting and forecasting when the sales growth
and the structure of the company are being involved. The sales also assist
the company to analyses the revenue of the company. The budget also
includes the expenditure that the company needs to bare in a single
financial year. The other things the budget includes are cost of sales and
start-up cost if the company is new.
FEASIABILITY OF BUDGETS AND FORECASTS

BIBLIOGRAPHY
Kaye III, F.J., Frances J. Kaye and III, 2016. Automatic budgeting
system. U.S. Patent 9,495,703.
Klychova, G.S., Faskhutdinova, М.S. and Sadrieva, E.R., 2014. Budget
efficiency for cost control purposes in management accounting
system. Mediterranean journal of social sciences, 5(24), p.79.
Batlle, E.A., PayPal Inc, 2016. Electronic payment and budgeting
system utilizing configurable payment cards. U.S. Patent Application
14/699,980.
Messick, D.E., Cross, K.E. and Jenne, J.E., Dell Products LP,
2017. System and method for aggressively budgeting power
allocation for an information handling system using redundant
configuration of power supply units. U.S. Patent 9,632,552.