Financial Management Report: Budgeting, Variance and Recommendations

This financial management report provides an in-depth analysis of a company's financial performance, focusing on budgeting and variance analysis. The report begins with the preparation of a monthly budget, comparing revenues and expenses to determine the company's financial position. It then moves on to creating flexible budgets for different consultant scenarios, recommending appropriate fees to maximize profit. A key component of the report is the variance analysis, which compares budgeted and actual financial results, identifying favorable and unfavorable variances and providing insights into the underlying causes. The analysis covers revenues, variable expenses, and other expenses, offering recommendations for improving financial efficiency and profitability. The report concludes by emphasizing the importance of flexible budgeting in financial decision-making and performance evaluation, supporting the overall goal of enhancing the company's financial health.

Financial management

Table of Contents
INTRODUCTION...........................................................................................................................1
Question 1........................................................................................................................................1
b.) Change in the financial performance of the business due to preparing budget with 31 days
rather than 30 days.......................................................................................................................2
c) Preparing report for commenting issues .................................................................................3
Question 2........................................................................................................................................3
A) Preparation of flexible budget for 18,000, 220000 and 20000 consultants............................3
Recommending the amount of fees that should be charged by Centre charge ..........................4
C) Preparation of statement showing budget variance analysis and providing suggesstion
regarding occurance of favourable and unfavourable variance...................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Financial management is a branch of management that includes a process of planning,
analysing, monitoring and controlling various financial activities of the business organisation
(Uyar and Kuzey, 2016). Adoption of this process helps in improving the overall financial
performance of the company and enhancing the profitability of the business by reducing cost of
overall business operations. The present study includes preparation of flexible budgets for the
company along with providing suggestions to the company's managers for the purpose of
improving the overall financial performance of the firm so that they could reduce the cost of
business and improve their profit earning capacity.
Question 1
A) Preparing monthly budget for the company and evaluating increase or decrease in the
revenues of the business along with reason behind change in deficit or surplus of the
company
particulars
Jan
uar
y
Feb
rua
ry
mar
ch
Apr
il
ma
y
Jun
e July august
Septe
mber
octobe
r
novem
ber
decem
ber
revenues
100
000.
00
100
000.
00
100
000.
00
100
000.
00
100
000.
00
1000
00.0
0
100000
.00
10000
0.00
100000
.00
100000
.00
100000
.00
100000
.00
grant from
Australian
government
322
400
0.00
403
000
0.00
503
750
0.00
629
687
5.00
787
109
3.75
9838
867.
19
122985
83.98
15373
229.98
192165
37.48
240206
71.84
300258
39.81
375322
99.76
les
s: expenses
directors
500
0.00
500
0.00
500
0.00
500
0.00
500
0.00
5000
.00
5000.0
0
5000.0
0
5000.0
0
5000.0
0
5000.0
0
5000.0
0
security
guard
350
0.00
350
0.00
350
0.00
350
0.00
350
0.00
3500
.00
3500.0
0
3500.0
0
3500.0
0
3500.0
0
3500.0
0
3500.0
0
truck
suppier
300
0.00
300
0.00
300
0.00
300
0.00
300
0.00
3000
.00
3000.0
0
3000.0
0
3000.0
0
3000.0
0
3000.0
0
3000.0
0
executive
salary
100
00.0
0
100
00.0
0
100
00.0
0
100
00.0
0
100
00.0
0
1000
0.00
10000.
00
10000.
00
10000.
00
10000.
00
10000.
00
10000.
00
truck
expenses
160
000.
200
000.
250
000.
312
500.
390
625.
4882
81.2
610351
.56
76293
9.45
953674
.32
119209
2.90
149011
6.12
186264
5.15
1

00 00 00 00 00 5
direct cost
for food
297
600
0.00
372
000
0.00
465
000
0.00
581
250
0.00
726
562
5.00
9082
031.
25
113525
39.06
14190
673.83
177383
42.29
221729
27.86
277161
59.82
346451
99.78
profit
166
500.
00
188
500.
00
216
000.
00
250
375.
00
293
343.
75
3470
54.6
9
414193
.36
49811
6.70
603020
.87
734151
.09
898063
.87
110295
4.83
Interpretation
By Analaysing the above statement showing the flexible budget for Oxform program
delivery food, it can be interpret that the company will feed 16000 person per day. This number
will increase by 25% on monthly basis. which will effect the revenue generation of the business.
In addition, by analysing the expenses of the company as per the budget prepared, it can be
evaluated that due to increase in the number of person to be feed, all the variable expenses of the
firm foe example, direct cost of food, truck expenses will rise as per the rise in number of people
feed (Becker and et.al., 2016). On the other hand all other fixed expenses such as salaries of
different employees, truck expenses will remain same.
By analysing the above statement, it can be interpret that due to as per the flexible
budget, the company will earn profit from its operations which will keep increasing in each
month. This increase in the surplus of the business would because of increasing number of
customers feed by the business organisation which would increase the revenue earned by the
firm from government and in pledged.
b.) Change in the financial performance of the business due to preparing budget with 31 days
rather than 30 days
As from the above table it can be compared between the budget of 30 days and 31 days.
The first thing its can be observed is that the revenue ledger that includes grant from Australian
government is $3120000 in 30 days budget which gets increased up to $3224000. But it can be
seen that the fixed revenue remains the same in both type of budgets. Thus it can be noted that
there is an increase in variable revenue in the above budget.
On observing the expenses list of the budget it can be seen that there is no change in the
fixed expenses and all the fixed expenses are similar in both the budgets as there is no change in
expenses for directors, security guard, truck driver. Executive salary, truck expenses etc. There is
a change in the direct cost for food that includes increase from 2880000 to 2976000. It can be
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observed that the variable expenses also changes along with the variable revenues. This in turn
results in the change in profitability as well. As it can be observed that the profitability in 30
days budget is 158500 and it rises to 166500 in 31 days budget. Thus the profitability increases
in 31 days budget.
Hence, it can be noted that the performance gets better in 31 days budget as compared to
30 days budget.
c) Preparing report for commenting issues
As by comparing the cut off budget with the actual one before it can be observed that the
grant by Australian government which was supposed to be $3120000 is reduced up to 2640000.
Thus, the revenue of the budget is decreased. But on the other hand it can be seen that fixed
expenses remains the same as before along with the variable expenses. Hence it can be observed
that the revenues are decreased and the expenses remains the same, which results in the loss in
the budget of 346500.
Question 2
A) Preparation of flexible budget for 18,000, 220000 and 20000 consultants
Preparation of flexible budget for 22000 consultants
Particular amount amount
revenues
child 55000
adult 35200
family 79200 169400
less: variable expenses
child 33000
adult 17600
family 66000 116600
other expenses
salary 40000
rent 10000
cleaning 5000
maintainance 10000 65000
Budgeted profit -12200
Preparation of flexible budget for5 opinion 1 for 20000 consultants
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Particular amount amount
revenues
child 60000
adult 40000
family 84000 184000
less: variable expenses
child 33000
adult 17600
family 66000 116600
other expenses
salary 40000
rent 10000
cleaning 5000
maintainance 10000 65000
Budgeted profit 2400
Preparation of flexible budget for opinion 2 for 18000 consultants
Particular amolunt amount
revenues
child 63000
adult 43200
family 81000 187200
less: variable expenses
child 33000
adult 17600
family 66000 116600
other expenses
salary 40000
rent 10000
cleaning 5000
maintenance 10000 65000
Budgeted profit 5600
Recommending the amount of fees that should be charged by Centre charge .
By analysing all each of the flexible budgets, it can be interpret that atleast $6 from child,
$10 from adults and $ 14 from family. It will help the Centre in generating the appropriate
amount of profit from its operations. If the centre charges fees less than it, it would result in
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suffering loss by the centre. On the other hand if the manager of centre selects the another option
of charging fee $7 from children, $12 from adults and $15 from family, It will result in reeducing
the number of consultation. Adoption of this option will result in increasing the profit of the
centre immediately, but it will result in reducing the revenue generation capacity of the business
in future definitely.
In this regard, it can be recommended to the Centre to adopt the opinion one of charging
fee of t $6 from child, $10 from adults and $ 14 from family as it will provide long term benefuts
to the centre.
C) Preparation of statement showing budget variance analysis and providing suggesstion
regarding occurance of favourable and unfavourable variance.
calculation of flexible budget variance
Particular budget actual variance
amount amount amount amount
(actual-
budgeted)
revenues
child 63000 12600 -50400
unfavourab
le
adult 43200 64800 21600 favourable
family 81000 187200 162000 239400 81000 favourable
less:
variable
expenses
child 33000 4500 -28500 favourable
adult 17600 18000 400
unfavourab
le
family 66000 116600 90000 112500 24000 favourable
other
expenses
salary 40000 50000 10000 favourable
rent 10000 12000 2000 favourable
cleaning 5000 8000 3000 favourable
maintenanc
e 10000 65000 15000 85000 5000 favourable
Budgeted
profit 5600 41900 36300 favourable
Interpretation
By analysing the above statement based on the calculation of variance occurred between
actual and budgeted financial performance of the centre, it can be interpret that the difference
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between surplus generated by the centre during the period shows favourable result for the
business. Further, due to reduction in the fee charged from the child, the revenue generated by
the centre by providing consultation to children is less than the budgeted revenues, in this order,
it is showing the unfavourable variance for the centre. On the other hand, it can be seen from the
variance analysis that revenues arising out of adult and family were favourable as it showed the
positive balance when compared with the budgeted amount which were 21600 and 81000
respectively. Variable expenses relating to adult found out to be unfavourable as the actual
expenses exceeded the budgeted figures. Furthermore, salaries, maintenance expenses also found
out to be favourable.
CONCLUSION
From the analysis of above report, it can be interpret that the flexible budget is used for
the purpose of estimating overall revenues and expenses incurred by the business on different
level of production or services provided by it (Gomez, Insua and Alfaro, 2016). It helps the
financial managers in taking appropriate decisions for the business and improve its profitability.
Further, by comparing the actual financial results of firm from the budget, the managers can
effectively analyse the change in financial efficiency of business.
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REFERENCES
Books and Journals
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Uyar, A. and Kuzey, C., 2016. Contingent factors, extent of budget use and performance: A
structural equation approach.Australian Accounting Review. 26(1). pp.91-106.
Becker, S. D and et.al., 2016. Budgeting in times of economic crisis. Contemporary Accounting
Research. 33(4). pp.1489-1517.
Gomez, J., Insua, D. R. and Alfaro, C., 2016. A participatory budget model under
uncertainty. European Journal of Operational Research. 249(1). pp.351-358.
Online
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