Analysis of Budgeting Methods for TownScape plc: A Finance Report

This report focuses on business finance and budgeting for TownScape plc. It begins by defining business finance and emphasizing the importance of budgeting. The report explores the purpose of making a budget, the cost drivers relevant to TownScape, and provides an analysis of traditional budgetary systems, highlighting their limitations. It then delves into alternative budgeting methods, including rolling budgets, zero-based budgeting, and activity-based budgeting, explaining their elements and potential applications for TownScape. The report recommends zero-based budgeting as a suitable approach. The report also includes a detailed discussion on the elements of budgeting such as income and expenses, and how they can be applied to TownScape. The report concludes by emphasizing the importance of a well-structured budget for achieving financial goals and improving the overall performance of the company.

Business Finance

Table of Contents
INTRODUCTION......................................................................................................................3
Part 1..........................................................................................................................................3
Purpose of making a budget...................................................................................................3
Important cost drivers for TownScape...................................................................................4
Analysis of traditional budgetary system...............................................................................4
Part 2..........................................................................................................................................5
Alternative budget method....................................................................................................5
Elements of budgeting and the potential application.............................................................6
Appropriate budgeting method used on the Townscape plc company..................................6
Conclusion..................................................................................................................................7
REFERENCES...........................................................................................................................8

INTRODUCTION
Business finance is classified as a process which makes the involvement of all the
basic factors that are required to maintain the expenditure along with the financial status of an
organisation (Diebold, 2015). With the help of an efficiently and appropriately developed
business finance, the overall productivity of the business can increase to a huge extent. The
report is about preparing a budget for TownScape along with the important cost drivers that
can help TownScape. Also, it involves alternative budgeting methods that can be involved in
order to increase the overall productivity of TownScape at a higher extent. The potential
application of all the alternative methods have also been included in the report.
Part 1
Purpose of making a budget
A budget is termed as a very essential aspect of the organisation performing business on a
large platform. Usually, a budget is meant for a year only, but it can vary as well according to
the policies and rules of the government. There are enormous aspects of a budget that should
be ensured in TownScape and their involvement throws much influence on the operations and
processing of the services. The purpose of a budget in TownScape is important because of the
factors that are discussed as below :
A proper budget made by TownScape can help them in analysing their actual market position
that how much they have gained the profits and also, if they have come down on the overall
market shares. Thus, it can also be considered as an effective tool that can help in evaluating
the overall business performance of TownScape. While analysing, if their business is going
on a higher level, then they can stay ensured but if they observe some sort of decrease in the
market shares, then they can make involvement of some modifications and improvements so
that they can again become able enough to achieve all their targets and goals, thus they can
again reach to that market position in a shorter period of time (Titman, Keown and Martin,
2017).
Also, if a structured and efficient budget has been made by TownScape, then it can surely
prove beneficial enough for TownScape. But the fact here which is to be ensured is that the
making of budget should involve the support and time of all the employees of TownScape. It
is because all the employees can have an appropriate rate of decision making in which they
all can represent their ideas and views. Also, if any of the employee think that there is some
strategy or technique that can help their business to increase etc. so, in an effective decision

making, all these factors can be discussed and that can actually help in making a balanced
budget for TownScape.
Another important factor in which budget can seem beneficial in TownScape is that it can
easily help in monitoring the performance and productivity rate of the operations and
processes of TownScape. It is because after making the budget properly, they can analyse that
how much they have gained the profits or to how extent, they have lose shares in the share
market.
Process of Budgeting in TownScape
TownScape can ensure following a proper budget so that it can help in maintaining a
sort of balance between all the operations and processes and that too in an efficient way. The
whole process of budgeting for TownScape is discussed as under :
The first step is to set goal that seems realistic enough. It is considered as one of the very
important factors because there is a lot of difference between assumptions and realistic goals.
Working on goals that cannot be achieved is not worthy and wastes much amount of time as
well. Therefore, TownScape can ensure focusing and implementing on a realistic goal so that
it can stay worthy enough and thus, ca further help the company to achieve its targets as well.
The second step is ensuring the basic amount they can spend on their processes because
analysis of that can help them in making the budget in a wise manner.
The final step is the designing of the budget. It should be done in a structured way so that the
company can be easily identify and analyse their processes and operations. Also, they can be
able to know that on which position they are standing in the market place and on the basis of
that, they can take further actions and operations.
Important cost drivers for TownScape
Cost drivers are considered as the factors that can help TownScape in managing the
expenditure of the processes and operations in a way that the financial status of the company
can stay balanced and managed. It is obvious enough that the overall competitiveness in the
market has maximized to a huge extent, so it is important if TownScape makes involvement
of the cost drivers that seems essential enough and also can prove beneficial enough in
gaining a satisfied number of customers, thus an increased rate of productivity as well
(Columba, Gambacorta and Mistrulli, 2010). Some well known cost drivers that can be
involved by TownScape involves headcount of the employees, overall number of leads etc. It

is because if TownScape can ensure analysing their expected budget and the profits they have
received, it can help them in analysing that how much they have benefitted through the means
of making and implementing a structured budget. Also, the involvement of traditional
budgeting can also help TownScape to achieve all their outcomes and objectives in a much
faster rate because it is considered as one of the simple ways of making and implementing the
budget.
Analysis of traditional budgetary system
Traditional budgeting system is considered as one of the ways that can actually
provide help TownScape in achieving all the objectives and outcomes but there are some
factors of the traditional budgeting system that can sometimes barred the operations and
processes as well. It is because the traditional budgeting method does not provide any sort of
transparency and it is considered as one of the essential elements to be included in the
business operations of TownScape. So, there are various other budgeting methods as well that
can be involved and these include rolling budget, zero budget etc. In case of zero budget also,
if the same is being applied by the TownScape, then they can ensure a better rate of
transparency (Drake and Fabozzi 2010). An appropriate and efficient rate of transparency
can help TownScape in staying clear enough about its operations and processes so that they
can be able enough to discuss and implement the factors that are actually required and can
provide help to the company and its operations. In case of traditional budgeting system, it is
classified as quite slow, so it can throw an effect on the rate of the operations and that too at a
huge extent. So, it is better if TownScape replaces their traditional budgeting system with
zero budgeting system etc. so that it can help in increasing their productivity as well as
popularity rate.
Part 2
Alternative budget method
Budgeting methods: The cited firm has selected the right budgeting method for their
firm in order to make it profitable and appropriate.
Rolling budget:
In this sort of budget which is ceaselessly refreshed and this financial plan ought to be
re-assessed are re-figure consistently. This incorporates the incremental expansion of the
current budget model. All organization needs to stretch out their business from one year to
another. In moving budget plans the organization get ready budget plans on a month to
month, quarterly or yearly premise (Berge and Black, 2011). Rolling budget plans is best

when it is embrace by less individuals can include in this procedure. The present time frame
is over the planning procedure starts again by making another arrangement for next
bookkeeping period.
Zero baaed budgeting:
Zero-based bidgeting (ZBB) is known as the technique for budgeting in which all costs must
be legitimized for all the new fixed period of time. The procedure of zero-based budgeting
begins from a "zero base," and each function inside an association is broke down for the
requirements and expenses. Budgeting plans are then worked all over the place as the things
which is required for the forthcoming time frame, paying little to whether each financial plan
is developed or minor than the past one (Cole And Sokolyk, 2016).
Zero based budgeting permits top-level key objectives to be actualized in the planning
procedure by binds them to particular utilitarian zones of the firm, in this expenses should be
first gathered and afterward estimated against past outcomes and current requirements.
Zero-based budgeting is additional tedious than the customary approach since which have to
begin without any preparation and action where the costs can be cut. It is essential for
the to understand where the amount is going to tool ZBB.
Activity Based Budgeting (ABB) is a technique for planning intended to give more
noteworthy straightforwardness into the spending procedure. In its most budgeting frame,
ABB is a technique for planning in which incomes created from the investigation and look
into exercises are distributed specifically to the unit in charge of the action. ABB 'enables'
more noteworthy transparent arranging and responsibility and makes motivators for units to
all the more effectively oversee assets and consumptions (Cole, 2013). Further, coordinate
control of assets produced from exercises makes motivating forces to set needs and grow new
exercises predictable with the general mission and vital objectives of the establishment.
There are some advantage activity based budgeting method that are as follows
Evaluation: It help in evaluating all the cost dricver and consider all the steps which are
covered in the study. Along with this activities which are not approaprite are eliminated and
only important activities are considered by the firm (Columba, Gambacorta. and Mistrulli,
2010).
Competitive edge:
It lead to sepeate all the activities which are not important and assist business in saving its
cost. Through the help of saved cost company can make innovative products and services for
its customer at lower cost as compared to its competitors. Therefore it assist the firm in
gaining competitive advantges.

Traditional budgeting process consume more time and in this all the resources are
allocated in an ineffective manner. Chance of human error got enhances in this method.
Results arrived from this method is less accurate and improper which can impact the firm.
Elements of budgeting and the potential application
Elements of budgeting and the potential application these methods are as follows:
The Townscape plc company prepare good budget for saving some money to
accomplish the long-term objectives. It is essential for the firm to consider elements while
preparing budget such as flexible expenses, income, unplanned income etc. One of the main
element of the budget is known as income as because if fund is not available then company
may not be able to pay bills and make any purchase (Drake and Fabozzi, 2010). Therefore, if
the cited firm select activity based method then its each activity will be associated with the
number of units. For instance, if company receive any order to sell then cost will be included
in its such as manufacturing cost. In this cost will be consider from the per unit of the product
Appropriate budgeting method used on the Townscape plc company
Zero based budgeting is one of the appropriate method which can be consider by the
firm in order to set appropriate budget. In this budgeting begin with Zero with the decision of
the new year budget. Therefore, previous year budget is not considered at the time of making
a new budget. In this budgeting method all the expenses are recorded and kept for new
period. All the company operation is analysed on the basis of requirements and cost. Further,
it allows in preparing top level of strategy for implementing it in budget (Kennickell, Kwast
and Pogach, 2015). In Zero based budgeting method cost is required to be divided and it
evaluated on the basis of previous result and present requirement. Along with this, method
also permit to identify the tsk and complete through findings new ways. It helps in evaluating
the solutions and provide alternative methods from where fund can be gathered. One of the
benefit of this budgeting method is that it provides appropriate results and its calculate the
operation costs. It assists in rectifying the method of allocation of resources. Therefore, this
method of budgeting is appropriate as compare to other methods.
Conclusion
From the above report it is concluded that there are enormous aspects of a budget that
should be ensured in the firm and their involvement throws much influence on the operations
and processing of the services. There are wide range of method which can be consider by the
firm in order to prepare well appropriate budget. Zero based budgeting method is most
appropriate technique as compared to other methods. A proper budget made by company can
help them in analysing their actual market position that how much they have gained the
profits and also, if they have come down on the overall market shares. Further it is concluded
that company can easily saves it unnecessary cost through preparing budget which help
company in saving cost and accomplish long term goal.

REFERENCES
Books and Journals
Cole, R. A., 2013. What do we know about the capital structure of privately held US firms?
Evidence from the surveys of small business finance. Financial Management.42(4).
pp.777-813.
Cole, R. And Sokolyk, T., 2016. Who needs credit and who gets credit? Evidence from the
surveys of small business finances. Journal of Financial Stability.24. pp.40-60.
Columba, F., Gambacorta, L. and Mistrulli, P. E., 2010. Mutual Guarantee institutions and
small business finance. Journal of Financial stability.6(1). pp.45-54.
Columba, F., Gambacorta, L. and Mistrulli, P. E., 2010. Mutual Guarantee institutions and
small business finance. Journal of Financial stability.6(1). pp.45-54.
Diebold, F. X., 2015. Forecasting in economics, business, finance and beyond. Department of
Economics, University of Pennsylvania.
Drake, P. P. and Fabozzi, F. J., 2010. The basics of finance: an introduction to financial
markets, business finance, and portfolio management (Vol. 192). John Wiley & Sons.
Drake, P. P. and Fabozzi, F. J., 2010. The basics of finance: an introduction to financial
markets, business finance, and portfolio management (Vol. 192). John Wiley & Sons
Green, C.H. and STRISCHEK, D., 2014. Banker's Guide to New Small Business Finance.
Kennickell, A. B., Kwast, M. L. and Pogach, J., 2015. Small businesses and small business
finance during the financial crisis and the great recession: New evidence from the
survey of consumer finances.
Titman, S., Keown, A. J. and Martin, J. D., 2017. Financial management: Principles and
applications. Pearson.