Budgeting Methods and Analysis

Business Finance

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Part A ..............................................................................................................................................1
1..............................................................................................................................................1
2..............................................................................................................................................3
3..............................................................................................................................................4
PART 2............................................................................................................................................5
4..............................................................................................................................................5
5..............................................................................................................................................6
6..............................................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Finance acts like a life blood for an enterprise as it is that resource which is required by
every enterprise in order to uplift their overall situations. Arranging financial resources is a
major element involved in the business so as is for the organisation. Emilia has been selected for
this project report and its importance has been explained throughout the report. This project is all
about budgeting and their different approaches which help an enterprise in order to maintain
consistency in their overall performance. The major emphasis of this project report is describing
various budget methodologies and their applications in the current business organisation Several
traditional budgeting methods have also been enclosed (Ambrosini and Jenkins, 2015).
Part A
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A budget is a quantitative expression of a plan for a defined period as it includes planned sales
volumes and revenues, resources quantities, costs and expenses, assets, liabilities and cash flows.
When any company is about to establish a new business, then preliminary step is to make budget
(Asongu, 2016). In this case the budget of Emilia's business is handled by Nadia, who is the
CFO. Behind formulation of the budget there are some purposes and objective which are given
as below:
PURPOSE of budget preparation
In context of business management, the purpose of budgeting includes the following
aspects :
Forecast income and expenditures: The main purpose of budgeting is to forecast the
expenditures that will be incurred during the project in order to generate higher level of income.
In this case Nadia should make that type of budget where he can determine the income that can
be generated in the hospital.
Tool for decision making: With the help of budget preparation Nadia can easily take the other
finance related decisions and can relax from that burden (Arrfelt and Wiseman, 2015).
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To evaluate the performance of managers: Another purpose of budget preparation is that one
can evaluate the performance of the managers and other employees as well. Here in this case,
Nadia can evaluate the performance as well.
Monitoring business performance: Purpose of budget preparation is monitoring performance
of the business as well. Nadia can monitor the performance of the employees of hospital (Cassar
and Ittner, 2015).
To communicate plans to various responsibility centre managers -This is another purpose of
budget preparation. Nadia can communicate and manage various canters such as reception,
administration, IT, maintenance, utilities etc.
Objectives of budget preparation
The main objective of a firm is to make an excess of revenue over expenses to maximize
profit. Many companies go through the budgeting process every year simply because they did it
the year before, but they do not know the reason behind creation of new budgets. Hence, the
objectives are following:
1. Provide Structure: The major objective is to provide the proper structure to the overall
business as Nadia alone cannot provide the significant structure. It is already prepared than can
quickly and appropriately provide the structure of the hospital (Chan and Fung, 2016).
2. Predict cash flows: Another objective is that with the help of budget Nadia can predict
the cash flows i.e. cash inflow and cash outflow. So, can predict the profit as well as net present
value as well.
3. Allocate Resources: In this case if Nadia make the budget than can easily know that
how many resources are has to be allocate to which department of the hospital.
4. Model Scenarios: With budget the organization is able to find out that the models or
works are prepared on time or not. It also helps to ascertain that the activities of organization are
being carried out in appropriate manner (Chiang and Chen, 2016).
5. Measure Performance: A common objective in creating a budget is to use it as the
basis for judging employee performance, through the use of variances from the budget.
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