Business Finance Report: Analysis of Budgeting Techniques and Methods

This report analyzes various budgeting and costing methods applicable to TownScape Plc, an international manufacturer of street furniture. It begins by establishing the purpose of budgeting and its role in developing a business model, then explores cost drivers and traditional budgeting approaches. The report then identifies and evaluates different budgeting methods, including rolling budgets, zero-based budgets, and activity-based budgets, assessing their potential applications and benefits for the company. The advantages and disadvantages of each method are discussed, along with ways to improve traditional budgeting systems. The report emphasizes the importance of financial planning, forecasting income and expenditure, and utilizing budgeting as a decision-making tool to enhance business performance. The analysis concludes by recommending suitable budgeting techniques to foster profitable growth and improve financial health within TownScape Plc.

BUSINESS FINANCE

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
1 Ascertaining the purpose for preparing budgets and to help in developing business model1
2 Determining the important cost drivers for business as well as identifying the traditional
budging approaches................................................................................................................2
3 Analysing the importance of traditional budgetary system for future plans.......................3
PART 2............................................................................................................................................4
4 Identifying the appropriate budgeting methods and ways to improve the traditional
approaches..............................................................................................................................4
5 Potential application of various budgeting methods...........................................................6
6 Ascertaining the fruitfulness of appropriate methods to company......................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
To ascertain the financial needs of the business such as availability of funds, costs
incurred in each operations as well as revenue gained in each activities will be administered and
managed properly. In present report there will be a discussion on TownScape Plc as international
manufacturer of street furniture. Moreover, there will be ascertainment of various budgetary and
costing system which in turn will be helpful in managing business operations as well as meet
requirements of entity at the required time. However, there will be comparison with the
traditional methods of budgeting and the current techniques. Thus, report is based on
determining suitable budgeting techniques which will be adopted by business as to have
profitable growth in the future.
PART 1
1 Ascertaining the purpose for preparing budgets and to help in developing business model
To set up an appropriate business model there will be fruitfulnesses of budgetary
techniques in implicating suitable changes into business operations. Therefore, budgeting system
helps in analysing the cost over each activities as well as it also sets limits which will be helpful
in meeting the goals of firm. The main motive of preparing the budget is that there will be proper
records of all the business transaction as well as management of proper work. Thus, it helps in
managing the financial health of the organisation which will be relevant with operational
practices and budgetary techniques that will be helpful in meeting the financial needs of entity.
To have plethora of knowledge, there is need to have implication of effective budgetary
techniques in TownScape Plc. Thus, it will be determined as: Forecasting the income and expenditure: It is the most important and adequate business
planning technique in terms of managing costs and revenues for a period. However, in
relation with analysing the income and expenses of business in each department and units
which will be helpful in determining the profitability of such activities in the long run.
Thus, it provides a model which recognised how a business will perform in the proposed
time period (Purpose of Budgeting, 2017). The income generated from each department
such as manufacturing, purchasing the material as well as managing operations of entity
in the long run will have effective development of operational efficiencies.
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 Decision making tools: These reports helps in determining the business operations which
in turn will be helpful in executing the business activities as well as making effective
decisions. Professionals at TownScape Plc need to implicate such technique which in turn
will be assistive in terms of analysing the business goals and managing the operations
(Kraemer-Eis and et.al., 2017). Thus, it will act as a funnelling agent which in context
with facilitate the adequate control over the expenditures as well as suggest the
alternative ways to control industrial costs.
 Administration of business performance: The past records and the actual gains in the
present time help in analysing the requirement of the business in the current time.
However, it will be motivating and the effective technique in improving the business
performance or efficiencies (Canales, 2016). Thus, it brings ability to think and forecast
the better and accurate plans for the future costs and expenses in a particular activity.
2 Determining the important cost drivers for business as well as identifying the traditional
budging approaches
To improve the financial health of any entity there has been various costs drivers which
in turn will be satisfactory to meet the suitable cost requirements in business (Cole, 2013).
However, there will be appropriate increment in the revenue and administrative control over the
expenditure of business.
Importance of cost drivers:
There will be proper contribution to the relevant business factors which in turn will be
effective and helpful as to meet the adequate requirements of fund in a time. However, there will
e various costing techniques which in turn facilitate the appropriate information relevant with the
cost incurred over labour, material and the overhead expenses (Bostan, 2014). Thus, the motive
of such costing and budgeting techniques is to ensure the administration of variable expenses in
the operations.
Cost budgeting:
This is the best cost driver which is needed to be implicate by TownScape Plc which in
turn will be beneficial as to have the adequate control over the expenses of the business. It will
be helpful in managing the cost of each industrial activities such as purchasing material,
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manufacturing it, salaries to the employees, selling costs and the promotional expenditures
(Ionescu, 2014). However, these are the costs which are needed to be managed as to have
appropriate business gains.
Application of traditional budgeting approaches:
The implication of traditional budgeting techniques which will require much attention as
well as time for the completion of such a projected plan. However, it comprises with the past
records of the business which are needed to be consider in the forward planning and decision
making (Panskov, 2014). Therefore, the outcomes derived from such techniques do not have any
reliable and efficient information which in context with helps in improving the industrial
operations.
Incremental budgeting:
This is the budgeting technique which in turn fruitful in determining the costs increasing
in each business transactions which will be helpful to the business as to manage the operations of
business. However, there will be proper implication of all the revenue and the profitability which
will be effective as to have appropriate gains. This fund technique comprises with past
behaviours of entity which will be fruitful in determining costs, revenue and the requirements of
the activities (Boholib, 2014). Therefore, it has been discovered by the professionals that the
costs will be increased in the coming time same as with the revenue of the firm. Thus, due to
post actions the future budgets will be stated in the incremental basis. Therefore, the professional
set the extending limits over the budgets which in turn helps inn managing the operational
functions.
3 Analysing the importance of traditional budgetary system for future plans
Traditional budgeting comprises with the past records which will be based on the past
behaviours of the firm, consumer requirements, costs incurred in operations etc. therefore, to
make the improvements in business activities (Kuznetsov, Porollo and Shel-epov, 2013).
Therefore, there are various advantages and disadvantage of this budgeting system which are
needed to be analysed by the business professionals of TownScape Plc such as:
Advantages:
In relation with the operations of entity there will be various benefits of the budgeting
techniques such as:
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 The influences of corporate budgeting will be indicative and facilitative in terms of
managing the financial activities. Therefore, which will be helpful in better framework of
control (Bogolib, 2016).
 It brings the proper organisational administration such as better managements of costs
and risks associated with the proposed plans will be analysed accurately.
 It also helps in identifying the needs of business will be indicative and helpful a to make
adequate improvements in industrial operations.
Disadvantages:
There are various disadvantages which in turn will have negative impacts of the
traditional budgeting techniques such as:
 Gathered data need to have proper records as well as attention of the accounting
professionals (Stupar and et.al., 2012).
 It will be very time consuming as well as it is inefficiently in terms of presenting the
reliable information.
 It does not comprise in the favour of strategic plans which in turn makes the inadequate
implication of all costing and budgeting techniques.
PART 2
4 Identifying the appropriate budgeting methods and ways to improve the traditional approaches
By considering the traditional approaches for planning the effective budgets for the
operations which are not accurate and effective in terms of presenting the reliable outcomes
(Marrero and Ramirez‐De‐Arellano, 2010). The implementation of appropriate budgeting
techniques for improving business operations of TownScape Plc such as:
Rolling budgets:
This is a traditional fund technique which in turn consists with the framework such as
monitoring the month-by-month budgeting techniques (Borghese and et.al., 2012). However, the
implication of such techniques will be assistive to company's progress, revenue and expenditures
incurred during the period. Therefore, these acts as the gathered information will be rolled out
forward to projected plan of the next period (Rolling Budgets, 2018). Similarly, it considers the
variance derived from the budgeted and actual outcomes that will be forwarded as to have
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appropriate gains. There can be various advantages and disadvantages of these budgeting
techniques such as:
Advantages:
 The forecasting the future plans of the business will be based on effective and accurate
budgets.
 It helps in reducing the ascertaining of poor budgeting as well as most concentrated
towards the short term budgeting (Kraemer-Eis and et.al., 2017).
 It provokes the managerial professionals to reassess the budgets and plans regularly that
will be effective and efficient as to have appropriate administration of the work culture.
Disadvantage:
 These are very expensive and took much productive time as compared to incremental
budgets.
 There may be demotivation employees as the time consumed by them is higher than it
created the dissatisfaction among them (Canales, 2016).
Zero based budgets:
These are the budgeting techniques which will be helpful to the managerial professionals
of TownScape Plc as it initiate on zero balance of the budgets for each business operations.
These are the most flexible and efficient budgeting techniques as the costs and requirements of
funds will be implicated by the professionals as per the needs (Cole, 2013). However, there are
various advantages and disadvantages to this budgeting techniques such as:
Advantages:
 It is the most flexible budgeting technique as the costs and funds will be presented to
each activity on time of its requirements (Bostan, 2014).
 It does not comprise with any past records and starts the budgeting with zero balance.
 It is the easiest technique of planning the budgets and which will be planned by the
managerial professionals other than accounting experts.
Disadvantage:
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 The costs implied in the budgets as per their requirements and the operational needs
which will be inaccurate to identify the actual costs of the activities.
 There will be huge manipulation of the funds on which the managerial professionals will
satisfy their personal means (Kuznetsov, Porollo and Shel-epov, 2013).
Activity based budgets:
This is the most effective and helpful technique which in turn helps in making the
effective costing and budgetary plans that will be assistive as to meet the financial requirements
in each units of venture (Activity Based Budgeting, 2018). Therefore, to implicate this techniques
in TownScape Plc. There is need to analyse the advantages and disadvantages of the activity
based budgeting techniques such as:
Advantages:
 It comprises with considering the costs of overhead activities which in turn will be
helpful in managing the operating expenses of entity.
 It will be a helpful tool and technique which in turn beneficial for managing the costs and
quality of activities performed in business.
Disadvantage:
 To analyse the costs in each business activity which will require more time and efforts to
ascertain the appropriate requirements (Bogolib, 2016).
 It will be complex in identifying the individual for the responsible business activities.
5 Potential application of various budgeting methods
The implication of these techniques will be very fruitful in managing the operational
activities of the firm as well as developing the adequate criteria to meet the business
requirements. However, in order to meet the funding requirements of TownScape Plc there is a
requirement of implicating the appropriate budgeting techniques. Thus, Zero based budgeting
techniques will be adequate in terms of managing the activities of the business. On the other side,
the activity based budgeting will be best for having the appropriate records of all the transactions
(Stupar and et.al., 2012). The professionals will be benefited as to have proper records of all the
financial activities which will be assistive and manageable to business operations.
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Activity based budgeting will help the in ascertaining the requirements of funds in each
business operations such as purchase of material, salaries to employees and labour in company.
There will be allocation of funds to the overhead expenses as well as variable and fixed costs
will be determined (Marrero and Ramirez‐De‐Arellano, 2010). Thus, to have the better
budgetary control and the administration of the work it will be helpful and beneficial techniques
that will make necessary improvements in the revenue and growth of entity.
6 Ascertaining the fruitfulness of appropriate methods to company
By considering the revenue, expenses and the financial scenario of TownScape Plc it can
be said that zero based budgeting technique will be helpful to the business as to have the
adequate amount of revenue generation. The main advantages of this budgeting technique is that
it initiates the business operations with the zero balance of budgets. Moreover, such implication
will bring the flexibilities to the managerial professionals as to meet the requirements of funds
for the activities (Borghese and et.al., 2012). The requirements of funds will be considered by the
business professionals as on the time of its requirements. Implication of this technique will bring
the flexibility of financial resources among the professionals. Moreover, to manage the
operations of business there can be use of various techniques which in turn will be effective and
helpful to the professionals as to have the adequate control over costs.
On the other side, the managers of TownScape Plc has to be more focused about actual
requirements of funds in entity. There will be manipulation of the funds such as the managers
will show higher costs in activities as to obtain the financial advantages for their personal means.
Therefore, in relation with managing the operational activities of the business there can be
implication of such techniques as to have the adequate gains and proper utilisation of the
resources (Kraemer-Eis and et.al., 2017). Similarly, in relation with controlling such
manipulation and financial drawbacks of the entity there is need to have appropriate execution
over the inflows and outflows of the funds. Thus, there will be use of vouchers, invoices to have
proper records of activities which in turn positively result in proper utilisation of available
resources.
CONCLUSION
On the basis of above study, it can be said that to improve the financial health of the
organisation the implication of budgetary and costing technique will be helpful in managing the
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business operations. However, there are various budgetary control techniques such as zero based
budgeting, activity based budgeting, rolling budgets, incremental budgets etc. which in turn has
the positive impacts over the revenue generation as well as improves the long term growth of
entity.
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REFERENCES
Books and Journals
Bogolib, T., 2016. Budgetary system of Ukraine: a new reality and global
challenges. Економічний часопис-ХХІ. (156). pp.41-43.
Boholib, Т., 2014. Providing of firmness of the budgetary system of Ukraine is in the conditions
of the crisis phenomena. Еkonomicnij Casopis-XXI (Economic Annals-XXI). 7. 8. pp.48-
51.
Borghese, N. A. and et.al., 2012, September. An integrated low-cost system for at-home
rehabilitation. In Virtual Systems and Multimedia (VSMM), 2012 18th International
Conference on (pp. 553-556). IEEE.
Bostan, I., 2014. Juridical tools of Governmental nature used to mitigate various difficulties of
the Financial and Budgetary System. Annals of the Alexandru Ioan Cuza University-
Economics. 61(2). pp.133-148.
Canales, R., 2016. From ideals to institutions: Institutional entrepreneurship and the growth of
Mexican small business finance. Organization Science. 27(6). pp.1548-1573.
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.
Ionescu, A. M., 2014. The role of the budgetary system in achieving enterprise
performance. Manager. (19). p.98.
Kraemer-Eis, H. and et.al., 2017. European Small Business Finance Outlook: December
2017 (No. 2017/46). EIF Working Paper.
Kuznetsov, N. G., Porollo, E. V. and Shel-epov, V. G., 2013. Development of methods of tax
control as a factor of balance of the budgetary system of the Russian Federation. Finance
and credit. (41). p.14.
Marrero, M. and Ramirez‐De‐Arellano, A., 2010. The building cost system in Andalusia:
application to construction and demolition waste management. Construction
Management and Economics. 28(5). pp.495-507.
Panskov, V. G., 2014. O popolnenii dokhodnoi chasti byudzhetnoi sistemy [About
replenishment of revenues of the budgetary system]. Finansy= Finance. (8). pp.3-8.
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Stupar, D. Z. and et.al., 2012. Wearable low-cost system for human joint movements monitoring
based on fiber-optic curvature sensor. IEEE Sensors Journal, 12(12), pp.3424-3431.
Online
Purpose of Budgeting. 2017. [Online]. Available through
:<http://www.leoisaac.com/budget/bud031.htm>.
Rolling Budgets. 2018. [Online]. Available through
:<http://kfknowledgebank.kaplan.co.uk/KFKB/Wiki%20Pages/Rolling%20Budgets.aspx>.
Activity Based Budgeting. 2018. [Online]. Available through
:<http://kfknowledgebank.kaplan.co.uk/KFKB/Wiki%20Pages/Activity%20Based
%20Budgeting.aspx>.
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