ABC Textiles: Analysis of Budgetary Control Tools and Financial Issues

This report provides a detailed analysis of budgetary control and financial issues faced by ABC Textiles, a fabric manufacturer operating in Turkey. It examines the advantages and disadvantages of various planning tools, including scenario, contingency, and forecasting tools, for budgetary control. The report further evaluates these tools in the context of addressing financial problems within the company. Additionally, it compares ABC Textiles' approach to financial issue resolution with that of Zara, focusing on the application of management accounting systems, key performance indicators (KPIs), benchmarking, and financial governance. The report concludes by emphasizing how management accounting tools can help organizations achieve sustainable success and providing insights into the effective management of financial resources.

Management Accounting

Table of Contents
Introduction......................................................................................................................................1
Task 3...............................................................................................................................................1
P4 Advantages and Disadvantages of planning tools for budgetary control..........................1
Evaluation of Planning tools for Responding to financial issues...........................................4
TASK 4............................................................................................................................................4
P 5 Comparing with other organisation regarding to solve financial issues..........................4
Management accounting leads organizations to achieve sustainable success........................6
Conclusion.......................................................................................................................................6
REFERENCES................................................................................................................................7

Introduction
Management accounting tools are the most important tools which can be used by the
organisation for controlling of the budgetary planning (Kaplan and Atkinson, 2015). On the other
hand, this can be rightly said that these tools are ultimately assist for managing financial
problems. Hereunder, these various planning tools are discussed along-with budgetary tools.
Financial problems are addressed by implementing these financial tools. This report is
constructed for ABC Textiles. The company is a fabric manufacturer for the clothing industries.
The company operates its business activities in turkey.
Task 3
P4 Advantages and Disadvantages of planning tools for budgetary control.
Budget is basically a statement which is processed for estimating the total amount of
expenses which will be incurred in future for certain business activities. Budget is made to
support the objectives of the organisation and it helps in leading the company to achieve the
desired goals. This statement evaluates the future costs and related items which will be used in
various departments of the organisation for achieving the future goals. Budget is constructed to
check the standards of the company and to figure out the idea of the percentage of revenue
coming in the company and to allocate it in cost groupings.
Budgetary control
It can be defined as a process that controls the business activities according to the
guidelines fetched from estimated budget statement. Budgetary control is a continuous process
which is essential for the organisation as it helps in various elements for the company like
planning and co-ordination (Höglund and et. al., 2016). This process also helps in providing the
methods for control. In other words, budgetary control is the valuable system of controlling the
costs from various inverts like preparing of budget, managing the departments, creating
responsibilities, analysing the actual performance of the company in accordance with the
budgeted one and making changes according to the following result to attain profitability in the
market. The objectives of budgetary control are-
 It ensures the future planning for the company by setting the different budgets for
required and expected measures by the departments.
 It helps in functioning of the departments in a effective and efficient manner.
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 It eradicates the waste and helps the company in generating profitability. It helps in anticipating capital expenditure for the company for future use.
Advantages and disadvantages of planning tools-
Scenario tool
The scenario tool is related with planning as it helps in evaluating the future changes and
situations occurring because of those changes to examine the ABC Textiles. This tool consists of
a method which aids in calculating the possibilities of future for strategic objectives of the
company. For growth of the company it is essential to predict the future but it is very
complicated to figure it out. This tool is essential as it enables the company to develop
managerial strategies for the future changes. By the use of scenario planning tool ABC Textiles
can predict the future scenario and can develop various budgets such as production, sales,
production, and it will help the managers of the company to assess the external environment of
the organisation. With the use of this tool it helps the company to eradicate the risk involved in
present scenario of the business activities as, it is said that it helps in understanding today better
when imagining tomorrow. Scenario tool is different from the contingency tool and forecasting
tool as it only helps in evaluating the changes in the future outcomes
Advantages-
This tool is useful for budgetary control as it helps in reducing different uncertainties
faced by the various departments of ABC Textiles. It will result in helping the management in
taking business decisions in a effective and efficient manner for the productive growth of the
company in future (Otley, 2016).
Disadvantages-
It is difficult to predict future and involves many complexities in the proceedings and the
outcome is also not accurate it is just a possibility which can go right. So, the tool involves equal
risk for the company's growth in future and also makes a large impact on the decision-making in
the organisation.
Contingency tool
This tool is described as a tool for budgetary control which defines the various elements
which are related to different departments of the company. The tool helps in providing financial
and non financial data timely and accurately for the use of its in future time period. This tool
helps to figure out the business interruption and forthcoming strategies that arouse emergent. So
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according to these situations it is important to do planning about the linear thinking. This tool
varies from other tools as it only aids the company in managing the budgetary control.
Advantages – Contingency planning tool are useful in creating impressive strategies that
are serving in handle-ling unexpected changes in the market and prevent the effects of it on
business. These tools result in helping to get over difficulties that will occur in the future and will
result in consequences to business development. ABC Textiles with the help of this tool are able
to make changes in the management policies of the company as and when required.
Disadvantages – Tool generating suggestions are not always good and it is a possibility
that at times the tool will go for a random decision that will not be suitable for various kinds of
situations in business activities.
Forecasting tool
It is a technical tool that is used to estimate the future trends and to figure out the effects
of it on the business activities. In context of use to budgetary control this tool is helping to figure
out the anticipated future expenses that will be required in allocating the budgets for decision
making policies for future growth of the company (Renz, 2016). In last the use of this tool is also
providing help in evaluating data analysis and crucial information about the market changes in
future and proper solutions are planned after the effective confirmation of the problem. With the
help of this tool the manager of ABC Textiles are able to verify standard outcomes and actual
outcomes of the company. As forecasting is a technical tool it varies from the other tools as it
only evaluates the future trends for the company.
Advantages – This tool helps in providing financial information of the market to ABC
Textiles that will be beneficial for the financial department of the company. Because, on the
basis of the information provided the department will be able in fetching decision for future
circumstances and will provide necessary changes according to the financial information
received.
Disadvantages – The tool is not including specific quantitative research so on the basis
of rough quantitative research decisions made will be wrong. These wrong decisions will not be
substantial to follow in regard of the subjective accounts as well as inputs of the accounts will be
wrongly defined and will lead to loss in the market for the company.
Various planning tools
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To reduce financial issues in ABC Textiles there are various tools which are used to
control involvement of excessive budget for the company. Various tools are used to analyse
financial issues and to find the solutions for them in appropriate manner. After the use
contingency tool which helps in controlling those specific risks the application is growing up in
various departments (Wouters and et. al., 2018). Forecasting tool helps to render financial
information which are resulting in serving to figure out the used total incomes and also helps in
to analyse total expenses of ABC Textiles. These various types of planning tools are helping the
company in preparing impressive budget process and also leads the company in proper allocation
of budget in each department.
Evaluation of Planning tools for Responding to financial issues
The company ABC Textiles deals with different types of financial problems that come in
the business environment. These issues are solved with the help of planning tools which has been
discussed above. In forecasting tool which is used to estimate future issues which are affecting
the business performance of the company in the market. This tool can resolve problems by using
required methods like key performance indicators and benchmarking.
TASK 4
P 5 Comparing with other organisation regarding to solve financial issues
The company ABC Textiles are applying management accounting system that are helping
them to manage financial resources of the business. Applying management accounting system in
the company with the help of these methods that are aiding the management to solve financial
issues of the company and the methods are -
Key performance indicator (KPI)
It is a technical tool which is used by the manager of ABC Textiles for measuring
performances of the employees. The tool is of an effective approach as it is successful for
measuring the ratio of business objectives achieved by the company in current time. ABC
Textiles use this method in analysing the success of the company in order to reach point of
reference. This method helps the company to reduce casual expenses that are generating at the
time of process of business activities (Maas, Schaltegger and Crutzen, 2016). The concentration
of employees are developed by associating them with various departments. The performances are
developed on the basis of impressive decision. The tool is helpful in reducing complex nature
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from the employees and helps in improving overall performances of the employees in the
company. This method is used to cure the financial issues of the company while the marketing
trends are fluctuating.
Benchmarking
It is a tool which is used by the company to measure performances of the employees by
making proper analysing process, services, products which are compared by the competing
company in the same market. The main objective behind the use of this tool of the company is to
make internal existence of enhancing the skills and improving the performance of the company.
As, it improves the skills of the workforce it helps in managing the organisational activities at the
time when there is a change in demand level from the market. It will compare performance with
other organisation and helping to improve it.
Financial governance
The tools are used for collecting, monitoring and controlling financial data related to the
company. Financial governance tool is used to cure the problem of lack of liquidity and helps the
management in managing the buying and selling activities of ABC Textiles. When the financial
issues occur in the market these tools are used to cover the cost and to eradicate the loss from the
market. These tools are also used to evaluate the changes in the exchange rate in the Turkish lira,
and measure the business required materials costs and machines.
Differences
ABC Textiles Zara
It is the company that is involved in
manufacturing clothes and the company uses
these methods as inventory management
system. As it records inventory that will be
determine in opening and closing cost .
It is a competitor textile industry which
involves in same process but it uses job costing
system as one of the tools. The difference
between the two companies is of market. if
price of every project and job will be
determined. Some technologies are used in this.
It take resource from other firm that bring
effective manner of working abilities.
Financial facts are proper tools which are used
so that they handle and control price in
Some financial risk like improper budgeting
which will be resolve by using the budgetary
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company which cause major issues. As there
are scarcity of resources and the company is
required to go for the alternative uses so, this
tools helps in providing efficiency in the
business activities.
As, per the case study ABC Textile face
financial issues due to change in demand
which can be overcome through adoption
benchmarking as a tool. It assist them in
preparing strategies in advance to cope up with
the future contingencies.
system reports in industry. It help to trace
record of expenses and income incurred in the
business at times.
Financial issues occur but at small level and are
cured with the help of proper financial tools
such as financial governance which assist them
to follow proper rules and regulations in order
to deal with future complexities.
Management accounting leads organizations to achieve sustainable success
Organisation when working properly to reduce financial issues and sustaining success in
ABC Textiles. In business activities management accounting system as well as managing report
act as a helping tool to accomplish the growth of the company in the market (Quattrone, 2016). It
can result in achieving success on the basis of performance of the company in the market.
Success is directly related to decision making and also related of the performance of the
company.
Conclusion
From the above mentioned report, this can be rightly said that the management needs to
adopt various planning tools for gaining the profitability. By using financial tools, cited company
overcome various financial issues.
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REFERENCES
Books and Journals
Höglund and et. al., 2016. Management accounting of control practices: a matter of and for
strategy. In the 9TH INTERNATIONAL EIASM PUBLIC SECTOR CONFERENCE,
held in LISBON, PORTUGAL, SEPTEMBER 6-8, 2016..
Kaplan, R. S. and Atkinson, A. A., 2015. Advanced management accounting. PHI Learning.
Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate sustainability assessment,
management accounting, control, and reporting. Journal of Cleaner Production.136.
pp.237-248.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–2014.
Management accounting research.31. pp.45-62.
Quattrone, P., 2016. Management accounting goes digital: Will the move make it wiser?.
Management Accounting Research.31. pp.118-122.
Renz, D. O., 2016. The Jossey-Bass handbook of nonprofit leadership and management. John
Wiley & Sons.
Wouters and et. al., 2018. T Course: Management Accounting 1 [T-WIWI-102800]. Module
Handbook Industrial Engineering and Management (B. Sc.).
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