Business Finance Report: Budgeting Analysis and System Recommendations

This report provides a comprehensive analysis of business finance and budgeting practices, focusing on the case of Leeworthy Ices Limited. It begins by outlining the benefits of budgeting, including forecasting and planning, and how the budget process aids in business development. The report then delves into traditional budgeting approaches, such as incremental and fixed budgeting, identifying key areas that the budget process must address. An analysis is provided to determine the suitability of a traditional budgetary system for Leeworthy Ices' planned future. Furthermore, the report explores alternative budgeting systems, including zero-based, activity-based, and rolling budgeting, discussing their benefits for the organization. The potential applications of these methods are examined, with a focus on identifying the most appropriate approach for Leeworthy Ices. The report concludes with a summary of findings and recommendations for optimizing the company's budgeting process.

BUSINESS FINANCE

Table of Contents
PART 2............................................................................................................................................2
PART 1............................................................................................................................................3
I. Benefits of budgets and how the budget process helps in development of the business.........3
ii. Application of traditional budgeting approaches and identify the key areas which budget
process needs to addressed..........................................................................................................4
Iii. Analysing whether a traditional budgetary system is appropriate to the business in its
planned future..............................................................................................................................6
PART 2............................................................................................................................................6
iv. Understanding alternative budget system and what are benefits for the organisation...........6
v. The potential application of these methods.............................................................................8
vi.) Analysing the one of these methods that are more appropriate for the Leeworthy Ices.......9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business finance is the most important for the company as it has a broad range of
activities that can assist them in management of capital and give the other valuable assets. The
research project is context to the Leeworthy Ices Limited in which it adopts the budgeting
process. Therefore, there is a mainly discussion on the budget process for which it assist the
company to develop their business (Hamilton and Raj, 2013). Thereafter, application of
traditional budgeting approaches and identify the key areas which budget process needs to
addressed that are adopt by the Leeworthy Ices Limited. Along with that, explanation on the
analysing whether a traditional budgetary system is appropriate to the business in its planned
future.
PART 1
I. Benefits of budgets and how the budget process helps in development of the business
The Leeworthy Ices Limited adopt the budget process for which it assist the company to
develop their business. Therefore, these have some advantages that are as follows-
Benefits of Budgets
 Forecasting- The company used budget process that gives the advantages of forecasting
for which firm carry out their business activities and functions accordingly. Thus, firm
budgets not only provides annual expenses projects that occur at the time of carry out the
various activities. It can be explained with the help of example in which the average
premium monthly assist the company to set the average monthly goals. The company
Leeworthy Ices Limited budgeting the correct amount of monetary to pay premium
monthly as it assist them in managing cash flows (Esty,2010 ). Therefore, it make sure
that they have a enough money to pay bill on each month. Thus, it has been asserted
budgets help in forecasting the annual company bottom line adopting greater than one
revenue.
 Planning orientation- Budgeting is that process that help company to make plan as well
as management whether it is day to day. Short-term and long term. Apart from this, the
main benefits is that time when the management does not carry out work successful or

meet it goals which it outlined in the budgets. Thus, it facilitate company to know its
financial position and how they can make improvement in future.
 Flexibility- The main advantages of budget help the company to track their business
performance all over the year. Thus, it allow firm to make the required changes and
Analysing whether a traditional budgetary system is appropriate to the business in its
capture the advantages regard to growth opportunities. Therefore, the budgets aid the
company how much finance they need to capture market through advertising from sales.
Budget process helps the Leeworthy Ices Limited to develop their business as it facilitate
the management team to effectively transfer their goals into the operating budgets. Therefore, it
allow the firm to effectively mapping out its financial roadmap for the company's business
operations. Most of firm used budgets to review their previous budgets to measure that how the
effectively firm follow guidelines. It also help the company to know the variance occurred which
show the negative information of a business (Hamilton and Raj, 2013 ). Thus, the variance in the
budget occur if there is unexpected firm growth in revenue sales that facilitate them to increase
the amount of budgets so, they can enhance sales in future time period. Apart from this, the
Leeworthy Ices Limited adopts budgeting for the purpose of planning future growth and expand
business. It will makes sure that the organisation can effectively finding out the new business
growth opportunities. It make sure that the company have a enough money that are needed to
make the effective and quick decisions. Therefore, it has been asserted that the budgeting process
help the company to assist them in development and enhancing future sales.
ii. Application of traditional budgeting approaches and identify the key areas which budget
process needs to addressed
The Leeworthy Ices Limited adopts the various types of traditional budgeting approaches
which are described below-
 Incremental budgeting approach- The budget has been prepared by the company
through adopting a previous actual or budget performance that are on the basis on
incremental amounts that are added for new budgeting period. It is highly based upon the
allocation of resources that are highly based upon from the previous year. The main
advantages of these budgeting is that it is more stable and it fluctuate gradually. Thus,
management can operating its departments that are on the basis of consistency. The main
benefits is that it is more simple in operating and understanding. It will avoid the conflicts

among the department which are treated in similar manner. Apart from this, there is a
more coordination among the budgets that are easier in achieving and it give positive
impact whether a traditional budgetary system is appropriate to the business in Analysing
whether a traditional budgetary system is appropriate to the business in its planned future
in quickly. Beside this, the disadvantage of incremental budgeting is that the methods and
activities are work frequently in similar manner. Therefore, there is no incentive in
establishing new ideas and it requires a huge amount of money in spending so, the budget
can be maintained in the next year.
 Fixed budgeting approach- Leeworthy Ices Limited adopts fixed budget approach in
which that they effectively deal with the high variation among the budgeted results and
actual results. It is designed in that manner in which the level of activity cannot be
change whether a traditional budgetary system is appropriate to the business in its
planned future that are actually achieved. It is highly based upon the single level of
activity. It can be used for the purpose of make comparison from the actual data
operations along with the single level of activities that are reflect in the budget. It is
assumes that the organisation will done work at some particular and production can be
achieved in effective manner ( McLean and Zhao,2014). Thus, the fixed budget can be
designed always remaining constant and the nature of fixed budget is a static. The main
advantages from the fixed budget is that it can be used to make comparison among the
budgeted levels and actual to know the the accuracy. Therefore, it cannot be modified
according to the actual volume and it is highly based upon the assumption.
There are various areas in which Leeworthy Ices Limited identifies the key areas which
budget process needs to addressed that are described below-
 Estimates- The company first need to estimating the sales, expected cost, production
level and resource availability from the division or department. The managers of
department are needs to deliver a estimated of future activities and conditions that will
effect on the organisation (Ballwiese and Gaynor,2012). Therefore, the mainly discussion
must be in informal form or report formats in detailed that must be in written form.
 Iterate- The company adopt budgets must have narrows or broads goals into a particular
business plans as well as metrics by group discussion iterate. Thus, the company have to
frequently forecasting updates with the actuals as the firm proceeds towards plan.

Iii. Analysing whether a traditional budgetary system is appropriate to the business in its planned
future.
The most appropriate traditional budgetary system approach is the incremental budgeting
approaches as is highly based upon the allocation of resources that are highly based upon from
the previous year. The main advantages of these budgeting is that it is more stable and it
fluctuate gradually. Thus, management can operating its departments that are on the basis of
consistency. The main benefits is that it is more simple in operating and understanding. On the
other hand, fixed cost is It is highly based upon the single level of activity. It can be used for the
purpose of make comparison from the actual data operations along with the single level of
activities that are reflect in the budget (Drake and Fabozzi,2010 ). For this reason, the
incremental budgeting approach is most suitable and It will avoid the conflicts among the
department which are treated in similar manner. Apart from this, there is a more coordination
among the budgets that are easier in achieving and it give positive impact in quickly. Beside this,
the disadvantage of incremental budgeting is that the methods and activities are work frequently
in similar manner.
PART 2
iv. Understanding alternative budget system and what are benefits for the organisation
Leeworthy Ices Limited company adopt the alternative budgetary system that are
involved in modern era that are describe as follows-
 Zero-based budgeting- It is that method of zero-based budgeting in that all the expenses
and it is based on the zero base. Thus, in these ZBB there is needs to analyzed their cost
and needs. It is prepared that are needed for the upcoming time periods whether these
budget is lower or higher than the preceding one (Hillier, and Jordan, et.al., 2010). Thus,
it is a rolling procedure that are done over the various years and it lower the cost through
ignoring the increment or decrement to a time period's budget. The main benefits of zero-
based budgeting is that it is not very much complex process and the most the organisation
adopt these budget for the purpose of manage its financial. Apart from this, ZBB assist in
efficient allocating of resources as it does not takes the historical numbers as it looks only
for the actual numbers. Furthermore, have a accuracy as it look at the each and every item
of cash flow that helps in computing its operational cost. Thus, it will assist the firm in

reducing cost because it provide a clear picture regard to cost towards the company's
desired performance.
 Activity based budgeting- It is that process in which there is an activities that produce
cost in each functional area of a company are need to be recorded. It will also show its
relationship that are analysed and well defined. It is mainly used by the cited company for
the purpose of efficiencies in the operations of business and establish a budgets that are
based upon the activities. They are mainly focus on the cost planning, attention on the
sales volume and various types of activities within the organisation (McLean and
Zhao,2014). It can be used by the firm for the purpose of planning management that help
them in reducing activities levels that are needed to create sales revenue. The main
advantages of activity based costing is that to gives reliability and accuracy in the cost of
product determination through mainly focus on cause and effect relationship. It gives
more realistic cost of product that are more reliable and correct in case of highest
diversity among goods produced like high-volume goods and low-volume goods etc.
Therefore, the another benefits is that it effectively tracing the cost of areas of
management process, responsibility, departments, customers and department against the
product cost.
 Rolling budgeting- It can be define as a continuous budget as it is updated frequently to
add or recent budget period is finished. Thus, these rolling budget is a revised setting of
financial planning for the next financial or accounting period that are mainly used to
replacing the prior one which are in frequently budgeting system. The cited company
mainly prepared this budgeting on the quarterly, annual and monthly basis. Thus, these
financial plans are mainly used in the recent time periods in setting the performance and
financial goals. Apart from this, there are some main advantages it gives flexibility are
more up-to-date that are changes continuously than the fixed budget. Therefore, it does
not need huge amount of cost as well as consume more than the static budget. The
another benefits is that it adjusting the time in effective manner that assist them in
producing the favourable oMcLean, R.D. and Zhao, M., 2014utcomes. Furthermore, they
are more responsive in nature regard to unexpected or uncertain changes occur in the
company. Thus, it allow the company to make the needed adjustments for the the recent
changes occur in the upcoming period.

v. The potential application of these methods
The Leeworthy Ices Limited company apply the above alternative budget which are as
follows- McLean, R.D. and Zhao, M., 2014
 Zero-based budgeting- The cited company apply these zero-based budgeting within the
organisation that are based upon rolling basis. It is mainly uses for the purpose of
reducing cost because it provide a clear picture regard to cost towards the company's
desired performance. Along with that, it is highly based upon the rolling procedure that
are done over the various years and it lower the cost through ignoring the increment or
decrement to a time period's budget. Furthermore, as it does not takes the historical
numbers as it looks only for the actual numbers (Oakshott, 2012 ). Thereafter, it have a
accuracy as it looks at the each and every item of cash flow that helps in computing its
operational cost. Thus, in these ZBB the is needs to analyzed their cost and needs. It is
prepared that are needed for the upcoming time periods whether these budget is lower or
higher than the preceding one. Thus, it is a rolling procedure that are done over the
various years and it lower the cost through ignoring the increment or decrement to a time
period's budget.
 Activity based budgeting- The ABB is highly used in the activities that are incur various
types of cost in the each functional area of the firm that are recorded. It is used to
calculate the cost for the purpose of forecasting a individual sales by adopting the
Activity based costing. Along with that, it is used to forecasting the sales numbers of
orders for the budgeting period. Thus, it finally the overall sales of office budget over th
period. Along with this, It gives more realistic cost of product that are more reliable and
correct in case of highest diversity among goods produced like high-volume goods and
low-volume goods etc. Therefore, the another benefits is that it effectively tracing the
cost of areas of management process, responsibility, departments, customers and
department against the product cost. Furthermore, It is mainly used by the cited company
for the purpose of efficiencies in the operations of business and establish a budgets that
are based upon the activities. They are mainly focus on the cost planning, attention on the
sales volume and various types of activities within the organisation. It can be used by the
firm for the purpose of planning management that help them in reducing activities levels
that are needed to create sales revenue.

 Rolling budgeting- The applicability of rolling budget is that for the purpose of updating
or modifying the budgets by adding other financial periods such as monthly and quarter
when the previous accounting periods that was expired. Therefore, the cited company
used these for the purpose of forecasting that are accurate and for the particular area of
business that required to control tight. Furthermore, they are more responsive in nature
regard to unexpected or uncertain changes occur in the company (Swift and Piff, 2014).
Thus, it allow the company to make the needed adjustments for the the recent changes
occur in the upcoming period. Apart from this, these rolling budget is a revised setting of
financial planning for the next financial or accounting period that are mainly used to
replacing the prior one which are in frequently budgeting system. The cited company
mainly prepared this budgeting on the quarterly, annual and monthly basis. Furthermore,
main advantages it gives flexibility are more up-to-date that are changes continuously
than the fixed budget. Therefore, it does not need huge amount of cost as well as
consume more than the static budget. Thus, these financial plans are mainly used in the
recent time periods in setting the performance and financial goals.
departments
vi.) Analysing the one of these methods that are more appropriate for the Leeworthy Ices
The most appropriate methods among the zero-based budgeting, activity based budgeting
and rolling budgeting. The appropriate budget is the zero-based budgeting. It has various
advantages are the it does not takes the historical numbers as it looks only for the actual numbers
( Vasant, 2012) . The main benefits of zero-based budgeting is that it is not very much complex
process and the most the organisation adopt these budget for the purpose of manage the
Leeworthy Ices its financial. Furthermore, it provide accuracy as it look at the each and every
item of cash flow that helps in computing its operational cost. Thus, it will assist the firm in
reducing cost because it provide a clear picture regard to cost towards the company's desired
performance. Furthermore, , in these ZBB there is needs to analyzed their cost and needs. It is
prepared that are needed for the upcoming time periods whether these budget is lower or higher
than the preceding one. Thus, it is a rolling procedure that are done over the various years and it
lower the cost through ignoring the increment or decrement to a time period's budget.

CONCLUSION
Summarizing the whole report it has been conclude that the Leeworthy Ices Limited
adopt the budget process for which it assist the company to develop their business. Budget
process helps the Leeworthy Ices Limited to develop their business as it facilitate the
management team to effectively transfer their goals into the operating budgets. Therefore, it
allow the firm to effectively mapping out its financial roadmap for the company's business
operations. Most of firm used budgets to review their previous budgets to measure that how the
effectively firm follow the guidelines. It also help the company to know the variance occurred
which show the negative information of a business. It has been analysed that The most
appropriate traditional budgetary system approach is the incremental budgeting approaches as is
highly based upon the allocation of resources that are highly based upon from the previous year.
The main advantages of these budgeting is that it is more stable and it fluctuate gradually. Thus,
management can operating its departments that are on the basis of consistency. The main
benefits is that it is more simple in operating and understanding. On the other hand, fixed cost is
It is highly based upon the single level of activity. It can be used for the purpose of make
comparison from the actual data operations along with the single level of activities that are
reflect in the budget.

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