Importance of Budgets for Twin Rivers Café

Finance

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................3
TASK...............................................................................................................................................3
A. Objective of preparing a budget for Twin Rivers Café:.........................................................3
B. Report showing the company’s revenue and spending variance for July along with
explanation:.................................................................................................................................4
C. Activity of variance should be of concern to management:...................................................5
D. Advise and Suggestions to Twin Rivers Cafe:.......................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

EXECUTIVE SUMMARY
This study summarises core objects of framing budget in context of company Twin
Rivers Café with aim to enhance overall performance of company. A comprehensive report of
variances between planned and actual figures of sales, expenses and profit of respective company
is also summarised in study. Further study contains considerable activity of variance and advise
or recommendations to company for minimisation of these variances.
TASK
A. Objective of preparing a budget for Twin Rivers Café:
Budgets are projections of overall sales/revenue and different costs incurred during
specific coming time-period and is normally composed and evaluated periodically. A budget act
as internal mechanism applied by managing personnels at companies like Twin Rivers Café and
is sometimes not needed for external parties such as stakeholders to disclose. Financial budgets
are vital for full productivity operations. The budget is principal means used by financial experts
to control spending and budget differences (Finance and Network, 2013). When comparing the
estimate with real numbers, analysts may detect any discrepancies between plan and actual costs.
The greater the variances, more managing assistance is required. A budget, apart from allocating
resources may also assist in setting targets, monitoring progress, and contingency plans
preparation. This also enables company to hold responsible to particular executives to minimize
variances in the budget. A thoroughly designed budget enables a company to keep track of where
they are economically. This enables long-term strategical planning from present operating
expenses to possible expansions. In this context following are some major objectives of
preparation of budget, as discussed below:
Measure performance: A common aim of producing a budget is to utilize it as the basis for
measuring the quality of workers, using budget deviations. This is a risky task, because workers
are trying to change the budgets to make it easier to accomplish their individual goals (called
budget slack).
Predict cash flows: budget is valuable for fast-growing companies, with seasonal revenues, or
with erratic patterns of sales. Such corporations have a hard time predicting how much money
they are going to have in near term, leading to frequent cash-related problems.