Leadership & Management: Financial Analysis, Budgeting - Houzit Ltd

This report provides a comprehensive analysis of leadership and management principles, focusing on the financial performance and budgetary control of Houzit Ltd. It includes an examination of the company's profit and loss statement for the year 2015/16, highlighting improvements in sales and net profit. The report also presents various budgets prepared by the management for the year 2016/17, including sales, profit, GST cash flow, and aged debtors budgets, emphasizing the importance of effective control over business activities. Furthermore, it evaluates the company's financial management practices, identifying weaknesses in cash and debtor management, and recommends improvements such as upgrading the computer system and revising debtor policies. The report concludes by emphasizing the need for these changes to enhance the overall business structure and revenue.

Running head: LEADERSHIP AND MANAGEMENT
Leadership and Management
Name of the Student:
Name of the University:
Author’s Note

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Table of Contents
Assessment Task 1...........................................................................................................................2
Analysing the Financial Information...........................................................................................2
Budgetary Control.......................................................................................................................3
Analysis and Communication of the Budget...............................................................................6
Activity 2.........................................................................................................................................7
Introduction..................................................................................................................................7
Discussion........................................................................................................................................8
Recommendation.........................................................................................................................9
Conclusion.......................................................................................................................................9
Reference.........................................................................................................................................9

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Assessment Task 1
Analysing the Financial Information
The main purpose of this part is to conduct an analysis on the financial performance of
Houzit Ltd for the previous year. The assessment is also concerned with the development of
budgets for the next financial year 2016/17. The financial information is considered for the profit
and loss statement which is prepared by the management of the company. The analysis of the
profit and loss statement for the year 2015/16 shows that the overall sales of the business have
enhanced significantly during the period which suggest that the business is growing
(Scarborough 2016). As the sales of the business has increased so has the variable costs of the
business as shown in the financial statemen5 which is prepared by the business for the period
2015/16. The sales of the business for the year 2015/16 is shown to be $ 15,714,108 which is
shown to have significantly improved from previous year. The costs of the business are shown to
be $ 5,457,780 which has also increased significantly due to increase in sales of the business.
The net profit of the business for the current year is shown to be $ 1,019,499 and the same is
shown to have increased which is mainly due to the high sales achieved by the business.
The analysis of the cash flow of the business shows that there have significant cash
outflows during the period, however the cash balance of the business is shown to have slightly
increased during the period. The overall holdings of the assets of the business is also shown to
have enhanced. This shows that the business has achieved operational efficiency in the
operations of the business.

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Budgetary Control
Figure 1: Sales Budget of the business
Source: (Created by the author)

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Figure 2: Profit Budget of the business
Source: (Created by the author)
Figure 3: GST Cash Flow Budget of the business
Source: (Created by the author)
Figure 4: Aged Debtors Budget of the business
Source: (Created by the author)
The above figures show the different budgets which is prepared by the management of
the company for the year 2016/17. The budgets are prepared considering the financial
information for the period of 2015/16 and the rate of growth for the same is considered same as
the current year. The budgets which are shown in the above table are Sales budget, Profit budget,
GST flow Budgets and Aged Debtors Budget which are prepared by the management for

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ensuring that effective control is maintained over the activities of the business (Adongo and
Jagongo 2013). The management of the company anticipates that the sales of the business would
be increasing from the current year and for this the sales of the business is shown to be $
19,795,297. The budget shows quarterly estimation of the sales of the business which is shown to
be on the rise and the same is shown to be the highest in the last quarter. Similarly, the profit
budget which is prepared by the management of the company also shows that the profits of the
business is also anticipated to increase due to increase in sales of the business and also marginal
decrease in the costs of the business (Ajibolade and Akinniyi 2013). The net profit of the
business is shown to be $ 2,677,166 for the year 2016/17 which shows tremendous growth in
terms of profitability of the business. This shows that the management of the company is putting
special emphasis on the profitability of the business and taking all the necessary steps for the
purpose of enhancing the profits of the business.
Analysis and Communication of the Budget
The budgets which is prepared by the management of the company is according to the
policies and current year trends. The management of the company would be requiring
appropriate funds for meeting the expenses of the business. The management of the company
needs to allocate a portion of the funds to replacement of computer software which would be
improving the financial management system of the business (Olagunju, ,Imeokparia and Afolabi
2014). The management of the company also needs to allocate appropriate amount of funds for
ensuring that the operations of the business can be conducted in a smooth manner. The targets
which are suggested in the budgeted would be focusing on achieving the goals and objectives of
the business.

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The financial management practices play a vital role in development of the business as a
whole and also appropriately depict how much funds would be required by the business. The
financial management practice of the business is shown to be inappropriate as the cash
management policies of the business and even asset management system is inappropriate. The
management needs to make revisions on the same and proper policies and practices are
implemented in the business (Parvadavardini, Vivek and Devadasan 2016). The policies which
the management follows in regards to the debtors are not appropriate as the management does
not regularly reconcile the balances of debtors so it cannot be determined whether the balances
which are shown in financial records are appropriate or not. The management anticipated that
there would an increase in the sales of the business and therefore it can also be anticipated that
there would be an increase in the balance of debtors of the business. Therefore, it is necessary
that the management improve the debtor management policy of the business.
The budget which is developed by the management would be communicated with other
departments with the help of an email or even a meeting can be conducted for discussing the
elements of the budget. The best approach which can be implemented by the management is by
conducting a meeting for open discussion regarding the elements which are covered in the
budget. The management can get feedbacks for the budgets and also receive suggestions as to
how certain targets can be adjusted.

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Activity 2
Introduction
The main purpose of this assessment is to analyse the financial management practices of
Houzit and how the management can take steps for improving the financial management
practices of the business. The management needs to focus on certain areas such as cash
management, reduction of expenses of the business, improving the debtor’s policies of the
business. The discussion would be focusing on such aspects and also contain recommendations
of how to improve the business structure.
Discussion
Financial management practices in a business is considered to be very important as the
same is closely related to profitability of the business. If a business has an effective financial
management practice then efficiency of the business would enhance effectively. As per the
current financial management practice, the business has inappropriate cash management system
and also there is a flaw in debtor management system. In addition to this, the management of the
company also need to replace the computer software requirement which is inefficient in
analysing the revenue and expenditure of the business (Jain, Singh and Yadav 2013). The current
system which is applied by the management of the company is inappropriate for estimating the
future profits of the business. In addition to this, internal audit of the business structure of Houzit
revealed that there are a lot of internal control issues which can affect the operations and revenue
generation ability of the business.

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The debtor’s policy of the business is shown to be inappropriate and needs to be revised
so that overall efficiency of the business can be enhanced. The policy of providing discounts to
customers is on net amount of the sale invoice and there is no standard procedure for such
processes (Turyahebwa, Sunday and Ssekajugo 2013). The cash management policies of the
business are also shown to be ineffective in nature as the management of the company does not
reconcile the balances of the cash register and therefore there is no way to assess whether the
amounts which are shown in the financial records are appropriate.
Recommendation
The recommendations which can be suggested to the management of Houzit for
improving the business structure are listed below in details:
 The management needs to replace the computer system which is currently being used by
the management and ensure that the most upgrade version and software are used by the
management of the company.
 The management needs to improve the cash management system and debtor management
system which would automatically improve the efficiency of the business.
 The management also needs to cut off their expenses and ensure that they take all steps
for maximising the revenues of the business.
Conclusion
The above discussion shows that a lot of aspect of the financial management system
which is followed by the management of Houzit needs to be changed and improved. The
assessment detects that cash management system and debtor management system of the business
can be improved and in addition to this, the management of Houzit needs to reduce the costs of

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the business so that the overall revenue of the business can be enhanced. The management needs
to implement the recommendations so that overall business structure can be improved.
Reference
Adongo, K.O. and Jagongo, A., 2013. Budgetary control as a measure of financial performance
of state corporations in Kenya. International Journal of Accounting and Taxation, 1(1), pp.37-5.
Ajibolade, S.O. and Akinniyi, O.K., 2013. The influence of organisational culture and budgetary
participation on propensity to create budgetary slack in public sector organisations. British
Journal of Arts and Social Sciences, 13(1), pp.69-83.
Jain, P.K., Singh, S. and Yadav, S.S., 2013. Financial management practices. In An empirical
study of Indian corporates (Vol. 3, pp. 265-278). Springer New Delhi.
Olagunju, A., Imeokparia, L. and Afolabi, T.S., 2014. Budgetary Control: A Tool for Cost
Control in Manufacturing Companies in Nigeria. European Journal of Business and
Management, 6(37), pp.98-108.
Parvadavardini, S., Vivek, N. and Devadasan, S.R., 2016. Impact of quality management
practices on quality performance and financial performance: evidence from Indian
manufacturing companies. Total Quality Management & Business Excellence, 27(5-6), pp.507-
530.
Scarborough, N.M., 2016. Essentials of entrepreneurship and small business management.
Pearson.
Turyahebwa, A., Sunday, A. and Ssekajugo, D., 2013. Financial management practices and
business performance of small and medium enterprises in western Uganda.

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