Manage Finances - Budget Analysis, Variance Report, Debtor Analysis

This article discusses budget analysis, variance report, and debtor analysis in the context of managing finances. It identifies issues with the budget and offers recommendations for financial management strategies. The article also includes a table showing variance report and debtor analysis.

Running head: MANAGE FINANCES
Manage Finances
Name of the Student:
Name of the University:
Author’s Note:

1
MANAGE FINANCES
Table of Contents
Variance Report Analysis................................................................................................................3
Debtor Analysis...............................................................................................................................4
Identification of Issues.....................................................................................................................4
Analysis of different Budgets and its Variances..............................................................................5
Performance Analysis......................................................................................................................5
Recommendation.............................................................................................................................6
Reference.........................................................................................................................................7

2
MANAGE FINANCES
Variance Report Analysis
Sales and Profit budget $ %
EXPECT Budget Actual Q 1 Variance Q 1 Variance Q 1 F or U
Profit & Loss Acutals 2011/12
Revenue
Sales $3,959,060 3,371,200$ $587,860 14.85% U
-Cost of Goods sold $2,256,664 1,955,296$ $301,368 13.35% F
Gross profit $1,702,396 1,415,904$ $286,492 16.83% U
Calculate(Gross profit %) 43% 42% 1% U
Calculate(Gross profit $) 1,702,396$ 1,415,904$ 286,492$ 16.83% U
Expenses
-Accounting Fees 2,500$ 2,500$ -$ 0.00% F
- interest Expense 21,127$ 28,150$ 7,023-$ -33.24% U
-Bank Charges 400$ 380$ 20$ 5.00% F
- Depreciation 42,500$ 42,500$ -$ 0.00% F
- Insurance 3,348.00$ 3,348$ -$ 0.00% F
-Store Supplies 937$ 790$ 147$ 15.69% F
- Advertising 200,000$ 150,000$ 50,000$ 25.00% F
-Cleaning 3,256$ 3,325$ 69-$ -2.12% U
-Repairs & Mainenance 16,068$ 16,150$ 82-$ -0.51% U
-Rent 660,127$ 660,127$ -$ 0.00% F
-Telephone 2,999$ 3,100$ 101-$ -3.37% U
-Electricity Expense 5,356$ 5,245$ 111$ 2.07% F
-Luxury Car Tax 7,491$ 12,000$ 4,509-$ -60.19% U
-Fringe Benefits Tax 6,500$ 7,000$ 500-$ -7.69% U
- Superannuation 37,404$ 37,404$ -$ 0.00% F
- Wages & Salraries 415,600$ 410,500$ 5,100$ 1.23% F
- Payroll Tax 19,741$ 19,741$ -$ 0.00% F
- Workers' Compensation 8,312$ 8,312$ -$ 0.00% F
Total Expenses 1,453,666$ 1,410,572$ 43,094$ 2.96% F
Net Profit(Before Tax) 248,730$ 5,332$ 243,398$ 97.86% F
Income Tax 74,619$ 1,600$ 73,019$ 97.86% F
Net Profit 174,111$ 3,732$ 170,379$ 97.86% U
Note: F = Favourable, U = Unfavourable
Figure 1: (Table Showing Variance Report)
Source: (Created by Author)

3
MANAGE FINANCES
Debtor Analysis
Debtor Analysis
Particulars 2009/10 2010/11 2011/12
Trade Debtors $850,000 $975,000 $3,959,059
Sales $14,550,100 $15,714,108 $19,795,297
Debtor Days 21.3 22.6 73.0
Figure 2: (Table showing Debtor Analysis)
Source: (Created by the Author)
Identification of Issues
The issues which can be identified from the budget which is prepared for the business of
Houzit are listed below in details so that the overall management of the business can be
improved:
 The costs which are considered by the management of the business are considerably high
in the budget in comparison to the actual sales of the business.
 The discount records which are shown in the budget are not clearly identified and the
same are shown in the net of figures as per the budget.
 The above budget also shows that the business has not properly managed the cash of the
business as the cash balances which are shown are not showing appropriate balance in
comparison to the records which are maintained in cash register of the business.
 The debtor management of the business is also not shown to be appropriate as the
reconciliation of the debtors balance which is one of the regular practices of the business
has not been carried out by the management of the company. Therefore, the debtors
balance which is demonstrated in the budget is not showing appropriate figures.

4
MANAGE FINANCES
Analysis of different Budgets and its Variances
Variances can be defined as the performance gap which exists between actual
performance results of the business and the budgeted analysis of the business. Variances analysis
is a tool of measuring the performance and efficiency of the business (Segun and Olamide 2015).
The sales figure which is shown in the actual performance of the business is much lower than the
figures which are shown in the budgeted estimates of the business. This shows that therefore, the
figure is adverse in nature and shows a performance gap (Bourmistrov and Kaarbøe 2013). The
gross margin and net margin of the business reflect the profitability aspect of the business and
the same is shown to be unfavorable which may be due to the low sale which is achieved by the
business and a part is also contributed by the increase in costs of the business.
Performance Analysis
As per the performance of the business, the industry is performing well in terms of
overall performance. There is further scope of profitability and growth in the business and the
retail industry is in the verge of further expansion. The performance of the business has changed
significantly over the years. The management of the business also follows the budgeting
approach for the purpose of measuring the performance of the business (Gorgotskaya and
Selyutina 2013). In order to measure any gaps in performance of the business, variance analysis
is undertaken by the management. The level of competition in the industry is also high which is
the high costs and the overall costs of the business is also shown to be high (Becker et al. 2016).
The sales of the business are also shown to be high for the business and the management can
bring about further improvements in the business.

5
MANAGE FINANCES
The policy of the debtors of the business is being amended by the management by
increasing the overall credit policy of the business. The debtor’s policy of the business has
brought about improvements in debtor’s collection of the business. However, the management
plan to increase the credit period would affect the liquidity of the business as the same would
block the funds of the business (Beraldi et al. 2013). The management needs to consider the
liquidity concerns of the business before taking any decisions regarding the debtor’s policy of the
business.
Recommendation
The recommendation which can be offered to the management of Houzit after analyzing
the credit policy and budgetary practices of the business are listed below in details:
 The cost of the business is shown to be slightly high which can affect the profitability of
the business and also meet the goals and objectives of the business.
 The management need to implement an efficient monitoring and supervisory plan in the
business for the purpose of controlling and maintaining the performance level in the
business.
 The management can also benefit significantly by following appropriate financial
management strategies which can bring about improvement in overall financial structure
of the business.

6
MANAGE FINANCES
Reference
Bourmistrov, A. and Kaarbøe, K., 2013. From comfort to stretch zones: A field study of two
multinational companies applying “beyond budgeting” ideas. Management Accounting
Research, 24(3), pp.196-211.
Gorgotskaya, E.A. and Selyutina, L.G., 2013. Budgeting as the innovative finance management
method of a building company in the conditions of business scale growth. Of beaming and
organization of effective functioning of innovation sphere of economy enterprise, industry, the
complex: proceedings of the International сonference, 28-30 April, 2013, p.92.
Segun, A. and Olamide, F.T., 2015. The global debate on budgeting: Empirical evidence from
Nigeria. Business Management Review, 13(1).
Becker, S.D., Mahlendorf, M.D., Schäffer, U. and Thaten, M., 2016. Budgeting in times of
economic crisis. Contemporary Accounting Research, 33(4), pp.1489-1517.
Beraldi, P., Violi, A., De Simone, F., Costabile, M., Massabò, I. and Russo, E., 2013. A
multistage stochastic programming approach for capital budgeting problems under
uncertainty. IMA Journal of Management Mathematics, 24(1), pp.89-110.