Financial Management - COURSEWORK 1

This report includes the functional budget for the accounting quarter August to October, findings of the company, critical review of the current budget preparation process, evaluation of beyond budgeting approach, and recommendations for the future.

Financial
Management
Coursework - 1
Contents

PART 1............................................................................................................................................3
Prepare the functional budget for the accounting quarter August to October........................3
Comment on the findings of the company.............................................................................6
PART B............................................................................................................................................6
Critically review the current budget preparation process.......................................................6
Evaluate the advantages and disadvantages of using beyond budgeting approach................8
Provide recommendations for the future based on the findings.............................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Budget refers to a statement comprising of the planned report of all the incomes and
expenses that could occur in near future. It helps the business in recognising the differences
among the actual results and the planned ones. They help the managers in controlling their
expenses by acting as a base for their actions. Through this the managers can make an estimate
about the amount that is going to be levied in the organisational processes (Apte and Kapshe,
2020). The report is divided into two parts. The first section prepares a a functional budget and
provides findings related to that. The second part discusses about the preparation process of
current budget and pros and cons of adoption of beyond budgeting approach. This also provides
recommendations for the future of the organisation.
PART 1
Prepare the functional budget for the accounting quarter August to October.
Sales Budget
August September October Quarter
Units 5030 6525 6000 1843275
Price per unit 105 105 105
528150 685125 630000
Production
Budget
August September October Quarter
Units required 5030 6525 6000
Closing stock (+) 9787.5 9000 8745
Opening stock (-) 5300 9787.5 9000
9517.5 5737.5 5745 21000
Raw Materials
Budget
August September October Quarter
Production 9517.5 5737.5 5745

Budget
Kg per unit 5 5 5
Raw Material
quantity
47587.5 28687.5 28725
Closing stock (+) 4410 4630.5 4862.025
Opening stock (-) 4200 4410 4630.5
Budget quantity 47797.5 28908 28956.525
Cost per Kg 6 6 6
286785 173448 173739.15 633972.15
Labour Budget
August September October Quarter
Production
Budget
9517.5 5737.5 5745
Hours per unit 4 4 4
Budgeted hours 38070 22,950 22,980
Labour cost per
unit
10 10 10
380700 22,9500 22,9800 840000
Production
overhead
Budget
August September October Quarter
Budgeted labour
hours
38070 22,950 22,980
Absorption rate 2 2 2
76140 45900 45960 168000

Administration
overhead
Budget
August September October Quarter
Budgeted cost 10000 10300 10609 30909
Selling
overhead
Budget
August September October Quarter
Sales Revenue 528150 685125 630000
Commission rate 10 10 10
52815 68513 63000 184328
Budgeted income statement
Particulars August September October
Sales 528150 685125 630000
Less: Purchase of
Raw Material
286785 173448 173739.15
Less: Labour 380700 22,9500 22,9800
Less: Production
overhead
76140 45900 45960
Contribution -2,15,475 2,36,277 1,80,500.85
Less:
Administration
overhead
10000 10300 10609
Less: Selling
overhead
52815 68513 63000
Profit or loss -2,78,290 1,57,464 1,06,891.85

Comment on the findings of the company
Budget prepared by the organisation helps it in determining the anticipated expenses that
would take place in the organisation in near future. As per the data collected above these are the
results that have been found.
Looking at the overall profit of the organisation, it has shown negative result in the
beginning of the the quarter. The loss of the unit figures out to be 278290, which increased with
a big difference in the immediate next month. In September, the profits of the company was
157464. But in the month of October, its income decreased by around 60000. Initially, the
company was selling less number of units figuring to 5030 units and in next month thus number
increased to 6525 units. In the month of October, the business is expecting that it would be able
to sell out only 6000 units. With the increase in the anticipation of sales the number of goods to
be produced also increased which resulted in increase in the total raw material cost, labour and
other overheads. In addition to this, the business is hopping that particular expenses of the
organisation will grow at particular speed like the production overhead. The production overhead
of the company has decreased in the month of September and then was almost stable in the next
year. This means that the company expects that it could handle the procedure of production so
efficiently that even on the increase in the number of units produced, the production overhead of
the company has decreased. While on the other hand, the administration overhead of the
company is expected to continuously increase in three months with a rate of 3%. The selling
expenses of the company which is the commission of the company has increased with the
constant rate of sales as this amount is 10 % of the sales made by the company. Sop overall, the
position of the organisation is good. It is earning good amount of profit though initiated with a
big loss.
PART B
Critically review the current budget preparation process
In the changing political and economic environment, each and every firm is required to
change its process of making budgets. David, in order to beat all the challenges, can adopt the
below mentioned steps:
1. Start Your Preparation Checklist – At first, it is required to prepare a checklist which
comprises of all the data that is required to be included in the budget and attainment of

goals. This involves the goals, a complete plan of task, the data set required and many
more. This would help in assembling the data and would assist in not missing anything at
the time of preparation of budget (Bapat, 2020).
2. Complete Year-to-Date (YTD) Analysis and Forecasting – Now it is important to
know that where the company stands in actual. This mean shat the company should
analyse its financial statement and other reports before moving further so that it can
check out that where the firm stands in actual.
3. Put out Your Strategic Goals – The next step is to frame the goals of the company and
ascertain the end result which the firm desires to obtain. While setting this, the
organisation is required to take into account the various expenses, investment made by
the business and the profits it expects to earn.
4. Select Your Best Budget Input Process – Now, it is time to prepare the actual budget.
There are two approaches which can be used here – Top down and bottom up. The First
one focuses on the anticipated outcomes and then shifts to the details after then. While
the other involves more details at primary level an then moves towards the Zero based
budgeting (Brigham and Houston, 2021).
5. Plan Carefully in Times of Uncertainty – This is the most important step, the person is
required to properly anticipate the uncertainties that can happen in the future. Through
this, the business would be able to make plan for some of the difficulties a can then
manage them.
6. Appreciate 4 Key Outputs of a Successful Annual Budget – The above-mentioned
process will help the business in getting a more successful outcome in the form of
favourable results. Through this the whole management team will give its best to achieve
desired results, the plan would be in proper sequence and the set key performance
indicators would also be used properly.
7. Deal with Your Annual Budget Like a Project – It is a modern approach that the firm
should use for the proper adherence of the figures projected in the plan. This would help
the firm in becoming more serious at the time of preparation of the budget.
8. Continuously Challenge the Numbers – For more productive results, it is important for
the user to make use of all the resources properly which can be done by the lowering
down the actual resulting figures from that of the budgeted values.

9. Address the feedback received from the board – This is the last and the most
important aspect of this process. At the time of preparation of the budget, the people
involved in this procedure should take the feedback from the party after every single
progress so that all the terms are properly satisfied and there is no chance of any sort of
error or omission at the time of its completion.
Thus, all these steps are required to be followed by the management for addressing the
problems of changing external environment and policies.
Evaluate the advantages and disadvantages of using beyond budgeting approach.
It is said to be a principle in which the organizations are required to move beyond the set
budgets due to the integral flaws of budgeting. This is stated that the range of techniques like
rolling of the forecasts as well as the targets that are related to the market can take the place of
method of traditional budgeting. The approach of beyond budgeting has some advantages as well
as disadvantages that are described as under:
Advantages:
 Performance of bench-marked is difficult to argue against: if one set of the targeted
budget is making use of the bench marked performance either in the form of external or
internal then it becomes closely impossible for anyone to express that the set targets are
not feasible as obviously, they have been completed by other departments of the
organization or by the rivalries that are actively participating in the market (de Azevedo
and et.al, 2020).
 Relative performance enhances motivation: The approach of beyond budgeting
enhances the probability of supposed fairness of estimation and can potentially enhance
the level of motivation. Because the edge of the performance naturally becomes
challenging but however it is still achievable.
 Planning will become more accurate and useful: Another advantage of beyond
budgeting approach is that it permits to adopt to the dynamic circumstances. One is no
longer stuck on predetermined, obsolete goals that continue to determine the process of
organization's decision-making.
Disadvantages:

 This approach makes use of rolling budget for keeping the track of the performance of
the company. Because rolling budget makes reflection on the present situation as well as
gives warning to the management of the organisation if anything goes wrong.
 Approach of beyond budgeting uses external benchmark instead of taking past
information for ascertaining the performance of the company (Jones and et.al, 2018).
 The beyond budgeting approach makes use of activities that are based on the preparation
of the budget. This kind of budget will be on the basis of the planning of the activities
that would change according to the activities. It entirely neglects the past information and
along with it also makes a reflection on the present change within the market place.
Provide recommendations for the future based on the findings.
From the above calculations, it can be stated that the company should invest some amount in
advertising its products so that it could increase the sales of the organisation. They are also
required to decrease its labour charges so that it could reduce the expenses incurred on the
manufacturing of the products. According to the budget prepared by David it is clear that the
firm is continuously growing, its profits is also increasing. This means that the business has the
potential of big growth and can earn high level profits. The company is also required to control
the expenses of the manufacturing process. This can be done by availing discounts from the
providers of the raw material. Through this the cost of acquisition could be reduced which would
directly impact on the cost of goods produced. This will too result in the rise in the profits
generation capacity of the entity. In addition to this, the firm can focus on increasing the capacity
of its labourers which would result in the increase in the number of goods produced. This would
reduce the cost of production and thus reduction in overall cost of product. Through this, the
price charged from customers could be reduced so that more customers can be attracted towards
the item. Thus, by adopting the above mentioned recommendations, company can make use of
its resources more effectively and can reduce the price of its goods along with reduction in the
cost incurred in its production. This will also help in managing the members of the organisation
and framing a budget that proper set to the firm.

CONCLUSION
From the above report it can be concluded that preparation of budget is the most important
step which a company must adhere before the initiation of any project. Even the firms who
operates at large level prefers to prepare a plan for their each financial in advance so that they do
not have to face any kind of problem of excess expenses in future. This also helps them in
projecting the anticipated amount of profit that a business should earn and motivated everyone to
work accordingly. Earlier the process of making this plan was different. It had number of
loopholes that has been addressed by the modern budgeting method. It takes into account all the
things that happened in past and consider them for the preparation of new budget. Also, it takes
into account the uncertainties that could happen in future and prepared the plan accordingly. The
beyond budgeting approach is also very useful in this modern environment. It provides better
control over organization by involving them in the decision making.

REFERENCES
Books and Journals
Apte, P. G. and Kapshe, S., 2020. International Financial Management|. McGraw-Hill
Education.
Bapat, D., 2020. Antecedents to responsible financial management behavior among young
adults: moderating role of financial risk tolerance. International Journal of Bank
Marketing.
Brigham, E. F. and Houston, J. F., 2021. Fundamentals of financial management: Concise.
Cengage Learning.
de Azevedo and et.al, 2020. Financial management information systems and accounting policies
retention in Brazil. International Journal of Public Sector Management.
Jones and et.al, 2018. Financial Management for Nurse Managers and Executives-E-Book.
Elsevier Health Sciences.
Osipov, P., Ziyatdinova, J. and Girfanova, E., 2018, September. Factors and barriers in training
financial management professionals. In International Conference on Interactive
Collaborative Learning (pp. 167-175). Springer, Cham.
Plaskova, N. S., Prodanova, N. A. and Reshetov, K. Y., 2020. Dealing operations as a means of
improving the efficiency of the financial management of a production company.
In Complex Systems: Innovation and Sustainability in the Digital Age (pp. 61-70).
Springer, Cham.
Shapiro, A. C. and Hanouna, P., 2019. Multinational financial management. John Wiley & Sons.