Business Finance Report: Cash Flow, Budgets, and Cost Management

This report provides a comprehensive analysis of key concepts in business finance. It begins by examining profit, cash balance, working capital, receivables, and inventory, and explores how cash flows impact working capital. The report then delves into a case study, applying these concepts to a real-world business scenario, including measures to boost cash resources. The second part of the report focuses on budgeting, outlining its purpose and various approaches, including traditional and alternative methods such as rolling budgets and zero-based budgeting. It highlights the role of budgets in cost management and concludes with an overview of the budgeting process and its importance in financial planning and control. The report offers practical insights and strategies for effective financial management in a business context.

Business Finance

Contents
EXECUTIVE SUMMARY.............................................................................................................3
MAIN BODY...................................................................................................................................3
Part 1.......................................................................................................................................3
EXECUTIVE SUMMARY.............................................................................................................7
Part 2.......................................................................................................................................7
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

EXECUTIVE SUMMARY
In the context of a company in modern business world to complete its operations, business
financing can be determined by the value of money resources. Organizations ultimately obtain
financing from vital tools including bonds, own capital assets and much more. The key object of
the Project work is to provide awareness of client word financing. The analysis for the proposal
is focused on two separate case studies, in which the first case is related with the study on profits,
net cash, work resources and much more. In addition second case study, the position of the
budgets in organizations as well as the performance assessment of conventional and alternative
budgetary approaches is addressed.
MAIN BODY
Part 1
(i) Explanation of followings:
(a) Profit: Financial benefit resulting from commercial operations is determined by the revenue
protected by the expenses and charges incurred in performing the operation (Anandarajan and
Srinivasan, 2012). The gains made by going through firms who raise the revenue or spend it into
the company. Net income is measured as less gross spending.
B) Cash balance: All cash income seems to be the real revenue and capital equivalent within an
company. In perhaps the most general point, a company's capacity to provide value to its owners
is determined through its opportunity to produce sufficient cash flow or even to maximize long
lasting cash flow.
Comparison
Basis Profit Cash flow
Mean This is the amount of money
received by different outlets.
This can be described as cash left
following cost reduction from sales.
Impact According to timing of
expenditures in and out of service,
the cash flow will be impacted
It is determined by the amount of
purchases carried out during a given
period of time.
Importance It is important for the company’s On the other side it is not related with
the overall functioning of company

sustainability. and other resources can be used to
meet business needs.
a) Working capital: This typically represents the company’s rapid financial condition and its
total ability. Working capital is removed from the financial earnings by the exclusion of the
existing liabilities. It illustrates that the firm has ample liquidity to cover its obligations in the
near term.
Receivables: The term for reimbursement involves a trade not carried out. It ensures that the
company will extend the cash advance to its customers. The business usually sells both in cash
and on loan its services and products.
Inventory: The word inventory could be defined as the market value of the provide a safer in
storage facilities for production and sale operations (Burns and Dewhurst, 2016). The inventory
comprises primarily of three types: raw material, processed items and manufactured goods.
Specific methodologies such as LIFO, FIFO and absorption cost approaches are used to
determine the worth of goods.
The accounts payable: It is a liability owed to a single borrower by purchasing goods or
services through cash redemption in advance that means that the borrower has bought items on
credit. Accounts Due over a span of time is not exclusive to companies.
(b) How cash flows affect working capital.
Cash flows are influenced by the different in working capital because existing liabilities
have an effect on cash flow regardless of shifts in valuation of capital assets. For e.g. if total
assets rise in comparison to accumulated obligations, cash flow becomes positive. In fact, the
cash balance is negatively impacted by the rise in net liabilities or the decline in existing assets.
This is because the cash balance became negatively impacted as the net obligations were raised.
When capital exits the business, liquid investments increase, so the cash flow becomes good.
(ii) Implementation with the case study of the above terms.
(a) Profit: In the context of company the year's profit was £50 million and there were equal to £5
million in net profits.
(b) Money flow- As mentioned above, the method is similar in and out of funds over a fixed span
of time. The following case study business reveals a negative cash balance because the loans are
up by 2 million pounds.

(c) Working capital: It's really the disparity between new and unused properties. As mentioned
above, the company cash flow may be negative, since excessive money could also result in
adverse working capital.
(d) Receivables: Their loan payables are £ 1.5 million as per Bright Lawn Limited Company.
Since the C&P firm owes this cash to supply supplies last year.
(e) Stock: the Business alluded to in the case study shall be engaged in the manufacture of
nozzles and valves. This demonstrates that they will provide a broad variety of inventory levels,
comprising raw materials, supplies and items in production.
(iii) Measures to efficiently boost the cash resources of the business.
For businesses, this is essential to insure that their cash flows tend to remain successful.
Only if operating capital becomes stronger should that become feasible. Throughout this sense,
the following are several essential measures towards enhancing cash flows:
Reward for receivables: Rewards for early payment consumers and the detection of
delinquency would discourage too much ageing of accounts. Both of these activities will serve to
efficiently increase the maximum benefit of cash flow.
Debt obligations satisfaction: It is another means of boosting client cash flow. Whether the
organization will fulfil its commitments on a timely basis, this can reduce the pressure of
increased interest payments and rising capital outflow.
Better inventory management: Efficient leadership of stock by businesses is crucial so that
processing losses are reduced and working capital can enhance. In this respect, the volume of
storage areas and strategic thinking is also too crucial to be monitored by companies. Through
these actions, businesses will significantly boost their overall cash flow. A structured warehouse
is assisted by a strong material control plan. Manager of company would have trouble managing
the product if the workshop is not coordinated. Most businesses prefer to maximize their
facilities by selecting the highest-selling goods as well as in warehouse positions that are readily
available. It further aims to improve the cycle of customer orders and to please consumers.
Inventory control tools, including scanners and stock tracking apps, can help to increase
performance and profitability significantly. Such tools help remove manual tasks such that the
workers can work on certain more critical fields.
Currency inflow: This will also improve the settlement of conflicts between buyers and sellers.
That is how a lot of resources will be expended in legal trials and litigation in situations of

conflicts. In order to save cash, it is also critical that companies settle conflicts within a shorter
time span. Currency values vary significantly due to different variables like economic
developments, future development and exchange rates. As currencies fluctuate greatly, economic
inequality and volatility can be generated and capital markets and foreign exchange may be
impacted. It applies to the external exchange or imports and exports of a country. In general, a
weakened currency would raise exports and expense imports, thus reducing the trade deficit (or
growing surplus) of a country over period.
They are also a growing means of boosting companies' cash flow. Such solutions will
contribute to address the problem of higher financing activities, like in the case of Bright Lawns
overall businesses. Therefore, effective asset handling contributes to something manager of
company to really aim for consumers regularly. They need rapidly to satisfy consumer desire
because they wish to see certain hard-earned clients back for their goods and services. Inventory
control lets company to meet this need by ensuring that certain consumers are able to buy the
correct goods.

EXECUTIVE SUMMARY
The second section of the project is to outlines various planning strategies and their
importance for businesses. Estimating expected revenue and expenditures over a given time span
may essentially be described as a word budget. The study discusses in a specific way the current
financial planning and alternate solution and its relevance for emerging companies for cost
control.
Part 2
(1) Purpose of preparing budgets.
Budget: This can be described as a schedule to demonstrate how often cash a individual or
company receives and what is expected to invest on different activities over a certain time
(Ziemba and Vickson, 2014). In general, the expenditures plan for a given one-year cycle are set.
For businesses, these expenditures plans play an important role, which is mentioned underneath:
 Planning assistance: Budgeting for the money management process is important. The
company owner will decide whether the year is successful or not by analysing total
revenue and expenses with the help of budgets. Budgeting creates a road map for a firm's
growth financial outcomes, as well as various plans and timelines are implemented. It
provides a practical foundation for the decision-making phase.
 Control assistance: A comprehensive budget includes details about just how much an
organization invests in any era. In reality, it allows the company owner to realize how
much profit to meet all expenditures. The accuracy of the knowledge gathered relies on
the efficiency of the financial management. Both of these practices allow businesses to
retain successful leverage.
This is also a primary goal in budgets for companies. There are various budgetary
approaches; a few of them are referred to below, for example:
Traditional budgeting:
This budgeting can be described as almost a method of preparing spending plans
according to the financial information from recent years, which is extracted from a broad range
business tools and procedures (Vasant, 2013). In addition, programs are not explored in order to
be used in proposals in this strategy. There are some benefits and drawbacks, such as:

Benefits: The traditional budget makes a difference. That is when executives are able to make
adjustments for profit as the expenditure plan makes it harder to address challenges. When an
organization meets the projection, it will decrease the operating expenses that are regarded
unnecessary.
Drawback: It can represent incorrectly the objectives an organization needs to accomplish.
Many managers or even contractors may modify predictions to boost the desirability of actual
findings. While it will improve morality, in the longer run it does not benefit the company.
Contemporary or new alternative way of Budgeting:
There is another method of making expenditures beyond traditional budgeting strategies.
The budget strategy is rendered by different initiatives through this method. In this regard, some
of the following expenditures plans are described below:
Rolling Budget: This is related to the continuous process in which plans are updates and
modified on regular basis as per the business requirement. The revolving budget is annually
updated at the end of the preceding fiscal cycle for the start of the new accounting period. The
revolving program requires a robust structure. This proceeds by a half or even a quarter instead
of a conventional 12-month program.
Benefits: Such rolling spending plans provide for more detailed preparation and control.
The difficulty of the budgeting process can therefore be reduced. Spending plan is mainly
revolving preparations for the immediate future and not the long term. It lets the investor realize
in which the company's sales and efficiencies shift.
Disadvantage: The main drawback to rotating expenditures is not updated for the whole
period. Only for the progressive period it is amended which makes work pressure over the
budget planner and many time they miss the important point while modifying for the next period.
ZBB: The "Null program" concept is a means of preparation and expenditure preparation
through top to bottom. The budgeting of ZBB begins with zero, likely from a conventional
budget focused on previous allocations.
Benefits: Zero-based budgeting allows organizations to distribute funds in a specific
(departmental) manner, as it will not aim at the forecasts of past expenses but relies on existing
statistics.
Disadvantage: The expenditure plans needs so much effort and money which is consider
to be the significant downside as it will impact the overall working of company.

Role of budgets in cost management
Traditional budgeting approach: This is a reasonable solution to better price organising
to reduce that as well. In company, it can be found that they have long employed this
method since, small companies do not have adequate financial information’s to manage their
expenses or investments, it strategy is useful even if an organization has historical records. This
budgeting strategy cannot however be appropriate for cost control for Boat World Plc Group.
Rolling budget: The idea of this expenditure plan is a conventional one, as the budgets
of previous years have been applied in a specific manner (Storey, 2016). They cannot provide
sufficient input for the control of overall costs for potential channels within the sense of Boat
world Plc. However, after certain years, they can apply this method if they receive financial
information from past years.
ZBB: This is an overall spending plan for new locations in different countries. This is
because, when manager implement this spending plan in business entrants, their reliability in
spending projections will boost because every activity action ZBB is included after real research.
ABC budget: This strategy may also benefit above-mentioned businesses, like the above
budget. The reason is that under these financial resources every other action is made available. It
is helpful to share out those procedures that lead to higher costs in the context of different
operations of respective company.
Analysing efficiency
Traditional budgeting: This method to budgeting is suitable for several years (Bendell and
Doyle, 2017). Regardless of the scarcity of financial reports over the past years, it is not suitable
for emerging businesses. This cannot be appropriate for the modern boat world plc. networks as
they do not have adequate amount of financial details for accurate forecasts.
Approach to alternate budgets:
Rolling budget: This strategy will be useful after a few years of the business within the
sense of new channels of above organization. This is possible because there would be a decent
number of data for many years to reliably forecast.
ZBB: New boat World plc can be beneficial with this budget because manager should
consider the reason behind any action that will further reduce uncertainty.

ABC budget: In terms of expense, the current Boat World plc. market positions will play
an essential role in the project. This is because every other action is independently aligned with
the existing strategy (Cleary and Quinn, 2016).
CONCLUSION
Considering the aforementioned report, it has indeed been determined that working capital is
a crucial factor for the organization to enhance the control of cash flow. The report ends with
numerous aspects including income, stock, receivables and several others. And how do cash
balances change. The second section of the project report summarizes on different approaches to
budget planning and the position of companies. Budgets such as ABC, ZBB etc. are listed in the
alternative budgeting strategy. Ultimately, it can be inferred that alternate budgeting is stronger
than conventional.

REFERENCES
Books and Journals
Anandarajan, M., Anandarajan, A. and Srinivasan, C. A. eds., 2012. Business intelligence
techniques: a perspective from accounting and finance. Springer Science & Business
Media.
Bendell, J. and Doyle, I., 2017. Healing capitalism: five years in the life of business, finance and
corporate responsibility. Routledge.
Burns, P. and Dewhurst, J. eds., 2016. Small business and entrepreneurship. Macmillan
International Higher Education.
Cleary, P. and Quinn, M., 2016. Intellectual capital and business performance: An exploratory
study of the impact of cloud-based accounting and finance infrastructure. Journal of
Intellectual Capital. 17(2). pp.255-278.
Cumming, D. ed., 2012. The oxford handbook of entrepreneurial finance. Oxford University
Press.
Hamilton, J. D. and Raj, B. eds., 2013. Advances in Markov-switching models: applications in
business cycle research and finance. Springer Science & Business Media.
Oakshott, L., 2012. Essential quantitative methods: For business, management and finance.
Macmillan International Higher Education.
Storey, D. J., 2016. Understanding the small business sector. Routledge.
Vasant, P., 2013. Meta-heuristics optimization algorithms in engineering, business, economics,
and finance. Information Science Reference.
Ziemba, W. T. and Vickson, R. G. eds., 2014. Stochastic optimization models in finance.
Academic Press.