Detailed Financial Budget Report: Twin Rivers Cafe (July Performance)

This report provides a detailed analysis of the budget prepared for Twin Rivers Cafe, focusing on the objectives of budgeting, revenue, and spending variances for the month of July. The report examines the company's financial performance, comparing budgeted figures with actual results, highlighting both favorable and unfavorable variances. Key areas of concern, such as decreased sales, increased costs of raw materials, and higher expenses for rent, insurance, and fuel are discussed. The report also offers practical recommendations for Twin Rivers Cafe to manage these variances, improve financial planning, and enhance overall profitability. These suggestions include regular reviews, cost control measures, and adapting strategies based on market trends and customer preferences. The report concludes that effective budgeting and variance analysis are essential for financial success in the cafe business.

Finance

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................3
TASK...............................................................................................................................................3
A. Objective of preparing a budget for Twin Rivers Café:....................................................3
B. Report showing the company’s revenue and spending variance for July along with
explanation:............................................................................................................................4
C. Activity of variance should be of concern to management:..............................................5
D. Advise and Suggestions to Twin Rivers Cafe:..................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

EXECUTIVE SUMMARY
Budgets are consider to be most crucial part for every kind of business as its plays a main
role in managing the expense for the future period as well as estimate income from these
expenditure. The main part reasons for writing this report is to define the objective of preparing
budget in Twin Rivers Cafes framing budgets which help in improving the overall business
performance. This report sums up the reasons for fluctuation in the current earning, net profit as
well as expenditure in respective company. In addition, report also covers crucial variance
activity and proper recommendation for company that support to reduce these variances.
TASK
A. Objective of preparing a budget for Twin Rivers Café:
In the present business environment, the concepts of budgeting is very much important as
it is consider as it help to forecasts sales revenue and different expenditure for particular period.
Budgets are reviewed and modified on the regular basis which help to reach the main target of
the period and increase overall profitability. A budget is used by executives of organizations
such as Twin Rivers Café as just an inner structure but does not often have to be disclosed to
third parties or creditors. The cumulative amount of output is subjected to funding budgets. Thus
spending plans is the primary way to monitor spending and revenue gaps by the financial
manager (Vance and et.al, 2016). When matching the projection with actual figures, businesses
will consider differences in estimated and actual costs. The larger the gaps, the greater the need
for administrative help to reduce the difference. In addition to the allocation of resources, a
budget may help to establish goals, track progress and schedule preparation. It allows the
company to take accountability for rising spending inequalities for those workers. A well-
designed strategy helps an organization to track its financial position. Although, expenditure
plans are effective enough to make strategies and plans by displaying the higher current expenses
on non productive activities which decrease the profit margin. Thus some of the main goals of
preparing budgets are discussed in the context of selected company:
Provide specific framework: Spending plan is primarily useful to give a business
instructions on the way to be implemented. It thus provides a mechanism for additional steps.
Normally manager of advised to execute a strategy for an organization with no better direction.
Clearly a budget wouldn't provide an appropriate structure if the Director discarded the budget

early and did not revise it for another year. Only if managers constantly listen and assess the
employees according to their plan as well as strategy in order to create a meaningful structure.
Measuring performance: The main aim of preparing a budget is to evaluate the
differences in figures of individual as well as entire company performance and make plans to
overcome these gaps. Thus manager continuously review the performance and make sure that
each and every thing in as per the planned budgets.
Resource Allocation: Many businesses utilize their budgets to determine how to allocate
funds to many investments such as purchase transactions for any assets. Although this will be a
beneficial task, to distribute the funds equally in order to determine the actual results from these
assets weather they are productive or not (Lidia, 2015)
Cash Flow Projections: A budget is ideal for companies that are fast-growing, have
seasonal pattern for sales etc. As these firms find it more difficult to determine how much capital
they are likely to receive in the short run giving problem of shortage of cash. Expenditure plan is
useful for cash flow programs, which yield even more and more consistent results. Therefore the
reasonable goal to produce a budget for Twin Rivers Cafes is to estimate the future cash inflows
(Senthilkumar, Nesme, Mollier and Pellerin, 2012).
Providing incentives: This is also one of the main reason for prepare budget on monthly
and yearly basis within an organization. As mannager set the benchmark for every worker
regarding their work performance and make regularly analyse their performance to provide
feedback if there is any gap. More importantly they also use to provide incentives for higher
performance than budgted resulting into better results in future.
B. Report showing the company’s revenue and spending variance for July along with
explanation:
Planning and Actual Budgets For The Month Ended July 31, 2018
Planning Actual Variance
Budgeted meals quantity (Qty.) 18000 17800 200
Revenue £ 81000 £ 80100 £ 900 A
Expenses:
Raw material (£ 2.40q) £ 43200 £ 42720 £ 480 F
Wages and salaries (£ 5 200+£ 0.30 q) £ 10600 £ 10540 £ 60 F

Utilities (£ 2 400 + £ 0.05 q) £ 3300 £ 3290 £ 10 F
Facility rent (£ 4 300) £ 4300 £ 5100 £ 800 A
Insurance (£ 2300) £ 2300 £ 2600 £ 300 A
Fuel £ 2480 £ 2490 £ 10 A
Net Operating Income £ 14820 £ 13360 £ 1460 A
From the above table, it is determined that budgets is beneficial is describing the actual
results weather it is adverse or favourable. The letter F shows the positive variance in the context
of company, on the other side A reflects the unfavourable gap within the actual figures as
compared to budgeted figures. The above table also shows that there were 17800 products were
basically sale out which is actually lower than the expected sales of 18,000 business units in the
respective year. As a result there have been a negative revenue variances of about £900 from
sales. Since the expected cost of raw material is £ 43200 and the current estimated cost is £
42720 which reflects a good or beneficial change. The organization has shown an optimistic or
beneficial difference of GBP 60 in compensation and benefit costs as well as a saving of 10 GBP
in service spending. In the field of leasing equipment, insurance and diesel, negative differences
of £ 800, £ 300 and £ 10 were registered, nevertheless. A negative disparity of £ 1460 is also
shown by the total net income of the company.
C. Activity of variance should be of concern to management:
Depending upon analysis from the above variability report, numerous variance practices
in the Twin Rivers Café business that managers will aim to reach expected targets have been
calculated. Cafe is then unable to achieve its planned revenue and the company's net profits vary
significantly. Three prices are increased with even a drop in sales value in relation to planned
estimates. Rental, diesel and compensation services are such charges which gets increased. Each
of these expenses differ substantially. The room for leasing is £ 800 beyond standards. In fact,
rates are greater than expected for insurance costs and the cost of fuel is also larger than
expected. Ignorance of this significant variation results in a decrease in the overall output of the
company. Management will insure that in such activities the variance difference is reduced.
There is also a important variation in cost and sum because the unevenness defines that company
may not reach the desired target in the future (Gago-Rodríguez and Purdy, 2015).

D. Advise and Suggestions to Twin Rivers Cafe:
To manage and control unfavourable variances in the actual results there is a need for
continuous and regular meeting among top manager and department manager so that they can
update and review of results. Cafe Twin Rivers is prone and poor sales as anticipated. Thus,
managers should also work on weak areas of business which have impact on profitability. Staff
and management must evaluate their anticipated and scheduled income efficiently to see if
scheduled output and efficacy rely on the café's efficiency (Finance and Network, 2013). The
business must create a timetable on the basis of tourism tradition, departures, flights and
customer preferences. This is helpful to produces the food for tourists as per their requirement
and company will be located near to the regional airport. The estimated profits should be
calculated once the economic impact of these factors in the Cafe sector is recognized. Every
cyclical trend, inflation and potential environmental consequences must also be kept in mind
when calculating expected revenue. For fact, there are also significant rises for fixed expenses
like leases and insurance premiums. Therefore, these expenses should be adjusted to decline the
operating profit volatility difference. The company should identify the expenses as fixed and
variable when assessing and preparing healthy financially. It is necessary for businesses to
recognize factors leading to cost inflation that maximize the overall costs. Insurance and leasing
services must be considered as fixed costs that do not impact the net selling price or figures. To
order to minimize cost of fuel, a business should also establish appropriate monitoring and
allocations of fuel usage payments. The corporation may also separate the authorisation of fuel
costs in order to create an appropriate internal control mechanism. As well as in order control
and retain overall costs, the organization should also perform internal control of the rate om
regular basis (Makings and et.al., 2014).
CONCLUSION
In end of this report, it is concluded that budgets help an organization to determine the
actual variables from the budgeted figures to the actual yearly budget. Manager of company are
required to increase the business performance by making suitable plans and strategies by
considering variances on priorities.

REFERENCES
Books and Journals:
Finance, E.H. & Network, C., (2013). The eurosystem household finance and consumption
survey-results from the first wave (No. 2). ECB statistics paper.
Gago-Rodríguez, S. & Purdy, D.E., (2015). The effects of budgetary knowledge and extrinsic
motivation on the importance that managers attribute to their budgets. Spanish Journal
of Finance and Accounting/Revista Espanola de Financiacion y Contabilidad, 44(1),
pp. 47-71.
Lidia, T.G., (2015). An analysis of the existence of a link between budgets and performance in
economic entities. Procedia Economics and Finance. 32. pp. 1794-1803.
Makings, U., & et.al., (2014). Importance of budgets for estimating the input of groundwater-
derived nutrients to an eutrophic tidal river and estuary. Estuarine, Coastal and Shelf
Science. 143. pp. 65-76.
Senthilkumar, K., Nesme, T., Mollier, A. & Pellerin, S., (2012). Regional-scale phosphorus
flows and budgets within France: the importance of agricultural production
systems. Nutrient Cycling in Agroecosystems. 92(2). pp. 145-159.
Vance, D., & et.al, (2016). The oceanic budgets of nickel and zinc isotopes: the importance of
sulfidic environments as illustrated by the Black Sea. Philosophical Transactions of the
Royal Society A: Mathematical, Physical and Engineering Sciences. 374(2081). p.
20150294.