Business Finance Report: Budgeting, Planning, Control, and Analysis

This report delves into the core concepts of business finance, focusing on budgeting and budgetary control. It begins by explaining the purpose and process of preparing a budget, emphasizing the importance of centralized control over cash, sales, and inventory, as well as the role of budgets in assigning responsibilities and enhancing operational efficiency for a company like Snappy Drinks. The report then explores the traditional budgeting approach, demonstrating its application in planning future cost management and analyzing its appropriateness for various business segments. Furthermore, the report contrasts traditional budgeting with other planning tools like zero-based and activity-based budgeting, outlining their advantages and disadvantages. The report concludes by assessing the most suitable budgetary control methods for effective financial planning, providing valuable insights into the practical application of these concepts within a business context.

BUSINESS FINANCE

INTRODUCTION...........................................................................................................................4
Explaining the purpose and process of preparing a budget.......................................................4
Demonstrating an application of the traditional budgeting approach for planning the future
cost management in the business.................................................................................................6
Analyzing the appropriateness of the traditional budgetary system to all or any segment of the
business for planning its future form...........................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8
INTRODUCTION...........................................................................................................................9
Explaining different planning tools of budgetary control and their advantages and
disadvantages...............................................................................................................................9
Application of the above methods to the organization..............................................................11
Analyzing the most appropriate method of budgetary control for budgeting...........................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business finance means the credit and the monetary value that is involved in the business. It
includes the procurement and optimum use of the funds for carrying the operations of the
business efficiently and effectively. The present study is based on the Snappy drinks, an
international manufacturer of the energy drinks, producing 60 different ranges of products.
Furthermore, the report includes the purposes and the process of framing the budget. It also
explains the traditional approach of budgeting and its appropriateness in the overall segment of
the Snappy drinks.
Explaining the purpose and process of preparing a budget
Purpose- the basic objective for preparing the budget for Snappy drinks is to provide for the
centralized control on the functioning of an enterprise with appropriate budgetary system.
Budget is prepared with the purpose of ensuring effective control on the cash, sales and
inventory of the firm (Peterson and et.al., 2017). It is also essential for the company to prepare
the budget is in fixing the responsibilities of several departmental heads and to enhance the
operational efficiency of the different divisions of the organization. The main purpose for
formulation of the budget is to estimate the future requirements of the funds that are to be
invested in business to meet the uncertain financial conditions in the future. For better planning
and coordination of the different parts of the business operations, framing of budget is important
for Snappy drinks.
Process of budgeting-
Obtaining Estimates- The first step in the process of budgeting is to obtain the anticipations
regarding the sales, expected costs, production level, and resource availability from each of the
departments. Under this step the managers estimate activities and the future conditions that will
impact or influence on the activities of the Snappy drinks. The discussion and the participation in
this step might be in informal way (Grint, Smolovic Jones and Holt, 2016). The detailed report is
prepared of the plan which will have to be submitted to budget committee for the approval.
Coordinating Estimates- The next step in the process of budgeting is the budget committee will
be evaluating the various plans that are submitted by the Snappy drink. Evaluation is made in
order to identify the potentiality in the plans in terms of the overall interest of an enterprise. It is
also done to assume the need of the resources, availability of the resources so that fair allocation
can be made within different units of the entity. By this coordination between the estimates made
in the budget can be ascertain so that the next step of the budgeting process can be effectively
met by the firm.

Communicating Budget- After the approval for the each budget plan, the budget is
communicated to the responsible managers and concerned departments of the Snappy drinks.
The approval by the budget committee is made on the basis of the organizational goal and the
availability of the resources in the firm (Baker, 2016). The changes or the modifications needed
in the budget if any then it will be made aware to the managers for obtaining their cooperation
and the support towards the formulation of the budget. Effective is budgeting is said only when it
involves better communication between the departmental managers for convincing them about
the alterations in budget.
Executing budget plan- After communication the final budget is prepared and presented to the
concerned managers and it is adopted as a plan for running the operations for the probable
budget period. The several service units in the Snappy drinks are needed to facilitate the required
raw material, facilities, labor and the other resources for carrying out the budget (Duda and
Habel, 2018). By this the plan made for the budget is implemented for developing smooth
functioning of the operations and to perform the task efficiently as per the budget framed. The
execution facilitates the next step that makes the controlling function effective in the
management of the business of Snappy drinks.
Reporting the progress in relation to budgeted objectives- In the last step of budgeting process,
Feedback is taken based on which the performance reports are formulated so that information in
relation to the performance of the managers and the top management are achieved in context of
the budgeted figures. Such investigation might call for the requirement to prepare the revised
budget in a year (Siddikee, 2018). For instance- advise on reducing the production level because
of decrease in the sales. This feedback can also be utilized as the base for formulating the budget
for the coming period or next year.
Demonstrating an application of the traditional budgeting approach for planning the
future cost management in the business
Traditional budgeting is the method of formulating the budget on the basis of last year’s
allocations or keep the previous period budget as a base. In this the current period budget is
framed by making adjustments in the prior budget. Adjustment includes like changing the
expenses on the basis of the rate of inflation, demand of the consumer and the market situation.
The revenues and the cost of the previous year budget forms as an integral part of present year
budget (Baker, 2016). Thus, traditional budget includes only those activities that required to be
justified from the past year’s budget. Incremental budgeting is similar to traditional budget as it
also involves the allocations based on past year with added or increased amount in the current
year’s budget.
For example-
Items 2017 2018
Sales 400000 600000
Cost of raw material 50000 80000

Income 600000 1000000
expenses 100000 300000
From the above example it is analyzed that traditional budget for the year 2017 shows the
different allocation of the items and on the basis of which the budget for 2018 is prepared with
added amounts.
Analyzing the appropriateness of the traditional budgetary system to all or any segment of
the business for planning its future form.
Traditional budgetary system are appropriate only for the those segments of the business
that are unvarying or does not changes with the changing circumstances. Traditional budgeting is
appropriate in the sense that it provides for the effective controlling by facilitating the
coordination in the financial activities of the Snappy drinks. It helps in managing the activities of
the business with ease and stability. It facilitates standardization in operations of the enterprise so
that decentralize can be infused within the management of the Snappy drinks. This provides the
freedom to the managers in running their operations in a smooth manner (Zanin, Comuzzi and
Costantini, 2019). On the other hand, traditional budgeting is not stated as the appropriate
approach for those segments which contains a varying nature and keeps on changing with the
changing in the trends in overall market. Traditional budgeting is the time consuming and result
in inaccurate formulations as it does not adjust for any of the changes. Reviews under this
method are not conducted on the regular basis which may lead to an outdated version of the
activities. This system fails in motivating the employees of the organization as it develops
unprofessional attitude and the gaming in the cost centre budget for the managers. It reinforces
the departmental barriers instead of helping in sharing knowledge. Thus, it is not an adequate
technique for all the areas in which the Snappy rinks operates in the overall market.
CONCLUSION
From the above report it is concluded that it is essential for the Snappy drinks to prepare the
budget as it provides all the details in relation to the activities of the business which are needed
for suitable operations of the business. Traditional approach suits only when the allocations are
static and does not change with the changing environment.

REFERENCES
Books and journals
Baker, J.D., 2016. The purpose, process, and methods of writing a literature review. AORN
journal, 103(3). pp.265-269.
Duda, J. and Habel, J., 2018, September. Manufacturing Activities Modelling for the Purpose of
Machining Process Plan Generation. In International Conference on Intelligent Systems in
Production Engineering and Maintenance (pp. 215-224). Springer, Cham.
Grint, K., Smolovic Jones, O. and Holt, C., 2016. What is leadership: person, result, position,
purpose or process, or all or none of these?. The Routledge Companion to Leadership, Routledge,
London and New York, NY. pp.3-20.
Peterson, J. and et.al., 2017. Understanding scoping reviews: Definition, purpose, and
process. Journal of the American Association of Nurse Practitioners. 29(1). pp.12-16.
Siddikee, M. J. A., 2018. The Development of the Green Capital Budgeting Approaches Based
on Traditional Capital Budgeting Approaches. International Journal of Innovation and Applied
Studies. 25(1). pp.253-262.
Zanin, F., Comuzzi, E. and Costantini, A., 2019. Management Control Systems: Concepts and
Approaches. In Human Performance Technology: Concepts, Methodologies, Tools, and
Applications (pp. 455-473). IGI Global.

INTRODUCTION
Budget refers to the anticipation of the revenues, cost, expenses and other operational activity of
the business that are required by the firm in assessing the future needs of an enterprise. The
present report describes the different planning tools for budgetary control that are adopted by the
Snappy drinks. The report also involves the application and the discussion relating to the most
suitable approach of budgetary control that an entity should adopt.
Explaining different planning tools of budgetary control and their advantages and
disadvantages
Zero-based budget- It is budget which is prepared from scratch with zero-base (Jimenez,
2019). It involves the re-evaluation of every line of the item that is recorded in the cash flow
statement and justifies all expenses that are incurred by the division of the Snappy drinks.
Advantages Disadvantages
Contrary to traditional approach of budgeting
where past trends are estimated to be continue for
next periods, Zero based budget anticipate that no
balances of the past need to be carry forward in the
new budget which results in meaningful budget.
Zero-base budget helps the firm in overcoming the
weaknesses preset in the incremental budgeting
regarding the budget inflation (Andersen and
Torp, 2019).
The element of accuracy in the budget increases
with the use of this method as it facilitates relook to
each activity of the business which leads in
assessing the entire picture of the cost involved
against the performance desired.
Zero-based budgeting consumes lot of time as
compared to the incremental budgeting as it
involves the assessment from the grounds every
year.
For preparing an entire budget from scratch might
need high requirement of the manpower for the
Snappy drinks. Many of the departments may not
have sufficient human resources and adequate time
for framing the budget from zero-base.

Activity-based budget- Under this method of budgeting resources of the firm is allocated
to individual business activities of the Snappy drinks. It involves identifying those activities that
incur costs within the organization (Jordan and Messner, 2019). It develops relationship between
those activities and then decisions are made on the amount of the total budget that needs to be
allocated towards each activity.
Advantages Disadvantages
Budget under this method are framed after the deep
analysis and the research which is not made in the
traditional approaches as they are based on
previous allocations. This helps in removing the
bottlenecks that might present in the budget,
associated to each activity.
Activity based budgeting eliminates all the
unnecessary activities which assist the Snappy
drinks in saving its cost. The cost saved helps the
firm in gaining the competitive edge in the overall
market.
This method evaluates every cost driver by taking
into account all the steps that are involved in a
particular activity.
Activity based budget lays more emphasize on the
short-term business goals and ignores the long term
prospects of the business. This resulted as very
fatal for Snappy drinks.
Highly skilled employees are required for the
execution of the activity based budget. This incurs
an extra cost in relation to the facilitating training
to the employees of the Snappy drinks.
The process of activity based budgeting consumes
ample of resources of Snappy drinks. It needs top
executive for conducting different analysis
(Yılmaz, 2018). This results in a time-consuming
activity as well.
Rolling budget- It is a revised or the new budget that includes the series of the financial
plans for the coming accounting period. This budget can be used by the Snappy drinks to replace
the previous budget in the continuous system of budgeting. It is the updated budget which is
prepared in place of the old version or when the old budget expires. It is also known as perpetual
and continuous budget.
Advantages Disadvantages
Rolling budget facilitates adjustment regarding the
changes occurred in the business of the Snappy
drinks. It involves the changes from the prior
period budget with increased continuity which
leads to more updated information than the static or
traditional budget.
This budget helps the firm in being more
responsive towards the unexpected changes that
might occur in any circumstances (Hijal-
Moghrabi, 2018). By this any uncertainty in the
future can be met.
With the use of the rolling budget, Snappy drinks
can assess the performance of its business against
the realistic and the rationalized targets.
Rolling budget needs robust system of information
and the skilled personnel for extracting the accurate
and valid information. This continuous revision of
the budget might be disturbing for the employees.
It is not advised to formulate the rolling budget
when the conditions are not changing constantly.

Application of the above methods to the organization
Application of Zero based budget-
This method of budgeting helps the Snappy drinks in scrutinizing its spending before the
beginning of the new budget. It helps the firm in determining the ways to offset the planned
increases against the decreases. It enables the firm in building knowing the information regarding
the re-evaluation of the items so that planning relating to future needs of the resources can be
effectively made by the mangers of the Snappy drinks. For example- for implementing new
projects the estimation in relation to under-performing programs can be evaluated through this
budget.
Application of Activity-based budget-
It helps the firm in drawing the attention towards the overhead activities and the costs
attached to it. It focuses on controlling the volume of the activity so that cost may also be
controlled which leads the firm in economies of scale. This method is applied by the firm for
recognizing the output cost that drives from the activity. It views business of the company as the
set of activities linked with the strategy of the organization (de Campos and Rodrigues, 2016).
For example- for identifying the cost effectiveness, ABB is a useful technique in the total quality
management.
Application of rolling budget-
Rolling budget comprises the information relating to the expenses, revenue and the
profits of the business. The predictions in terms of the expenses and the revenues will be
changing continuously under this budget with the use of current numbers. For instance- It is
anticipated that the snappy drinks would earn revenues on the sales of $60000 in the month of
January, but actually the business earned $ 45000. The budget will be updated for removing
January and adding the coming year January forecast, the total of the forecast will be decreased
by appropriate amount.
Analyzing the most appropriate method of budgetary control for budgeting
Zero-based budgeting is considered as the most appropriate tool for the planning the
business activities of the Snappy drinks. This budget is appropriate because it justifies every
activity with the assessment of the revenue that each cost will be generating for Snappy drinks. It
is method that focuses on identifying determining the task and the funding regarding the
expenses involved in the task, irrespective of current structure of the expenditure. It is the
method that helps the firm in re-examining each of the item and the expenses which will be
considered as useful for Snappy drinks in attaining success from the expansion in different areas.
This method helps the firm in efficient allocation of its resources as it does not include historical
numbers but seeks for actual numbers (Jimenez, 2019). Zero-based budgeting enables the firm in

identifying the opportunities and the cost effective method in operating things as it eliminates the
redundant or the unproductive activities from the business. It also assists the firm in improving
the communication and the coordination between the departments and encourages the staff by
making them participate in the decision making. Thus, Zero-based budgeting aims for evaluating
the true value of the expenses that will be incurred by the department. Snappy drinks can achieve
its mission by using this method as it focuses on the long term prospects of the business and
provides for long range planning to serve for attainment of core mission of an enterprise.
CONCLUSION
From the above report it can be summarized that planning tools plays an important role in
preparing the budget that considered as useful in performing their task as per the set standard.
Any deviation occurs can be met by taking corrective action by the mangers of the Snappy drinks
effectively.

REFERENCES
Books and journals
Andersen, T. J. and Torp, S., 2019. Achieving Adaptive Responsiveness through Strategic
Planning, Autonomous Strategic Actions, and Interactive Controls. In Strategic Responsiveness
and Adaptive Organizations: New Research Frontiers in International Strategic
Management(pp. 61-80). Emerald Publishing Limited.
de Campos, C. M. P. and Rodrigues, L. L., 2016. Budgeting Techniques: Incremental Based,
Performance Based, Activity Based, Zero Based, and Priority Based. Global Encyclopedia of
Public Administration, Public Policy, and Governance, pp.1-10.
Hijal-Moghrabi, I., 2018. Why Is it So Hard to Rationalize the Budgetary Process? A Behavioral
Analysis of Performance-Based Budgeting. Public Organization Review, pp.1-20.
Jimenez, B.S., 2019. Assessing the efficacy of rational budgeting approaches: fiscal recovery
planning and municipal budgetary solvency. Public Management Review. 21(3). pp.400-422.
Jordan, S. and Messner, M., 2019. The Use of Forecast Accuracy Indicators to Improve Planning
Quality: Insights from a Case Study. European Accounting Review. pp.1-23.
Yılmaz, F., 2018. Budgeting as a Tool for Sustainable Development. In Handbook of Research
on Supply Chain Management for Sustainable Development (pp. 42-60). IGI Global.