Case study on budget management and financial planning

Question: Describe about the Budget Management and Financial Planning. Answer: Introduction The current study presents in detail different characteristics and nature of budgeting and mentions about a variety of tools as well as procedures of financial management to assess the overall financial budget prepared for Big Red Bicycle Pty Ltd. However, the primary purpose of the current study also includes examination of a number of different variables that are imperative for carrying out the budgeting analysis. The first section of the study presents the original master budget file and thereafter the amended master budget file. The original master budget is amended according to the change in the requirements to form an updated budget report for the financial year 2011 and 2012. Therefore, the updated master budget also shows in detail the variance and the percentage change. The report also presents the expense budget from the sales centre. The sales centre expenditure budget also helps in presenting the appropriate presentation of cost (Anandarajah et al 2009). These two tables that is the updated budget report and the sales centre expenditure budget helps in understanding that the adjustments in these reports have immense influence on the master budget. Therefore, the first section of the project primarily carries out the examination of the cost centre for appropriate scrutiny of the budget. This includes keeping track of the changes and reflecting of the changes in the updated budget and developing arguments for the alterations and negotiating all the different changes. The second section of the study focuses on the assessment of the risk associated to the special project. This section also includes development of an appropriate contingency plan in order to eradicate the risk of decline in sales based on the understanding of the current economic climate. Review of the master budget and cost centre budgets Pty Ltd for the financial year 2011/2012 Figure 1: Master Budget Report Updated Master Budget for FY 2011/2012 with absolute variance and % change Figure 2: Changes in Master Budget File The updated master budget report shows the change in the rate of commission from 2% of sales to 2.5% of the sales. However, this has added significantly to the cost of goods sold and the has raised the total cost of cost sold from 660000 to 675000. This in turn has lead to decline in the overall gross profit of the organization from 2340000 to 2325000. The general and administrative expenses, the marketing expense, employment expense and the occupancy cost has remained the same during the period. In addition to this, the net profit before calculation of the interest and tax has also declined from budgeted figure of 938500 to 923500. The income tax that is calculated on the net profit therefore has also decreased in actual figure from 234625 to 230875 due to decline in the overall net profit of the organization (Anandarajah et al 2009). The table below shows the sales centre expense budget that takes into account the expenses incurred by the company for the office supply, wages determined, the telephone expenses and the commissions paid. According to the two tables presented above, that is the table on the updated master budget report and the segmented cost table of the sales centre, it can be hereby inferred that the particular adjustments exerts immense influence on the entire master budget as well as the cost centre of the corporation Big Red Bicycle Pty Ltd (Anandarajah et al 2009). As presented in the table, the net profit of the organization has decreased in all the quarters and on the other hand the expenditures have increased considerably. In addition to this, it is also apparent from the table above that the sales commission has also increased that in turn has increased the overall cost of goods sold. The previous gross profit was registered to be 2360000 that have now declined to 2325000 owing to the increase in the percentage of commission on the sales leading to variance of 15000. The sales in the first, third and the fourth quarter are registered to be less than 30% of the fourth quarter. However, the sa les in the 2nd quarter depend completely on the successful accomplishment of the repair and maintenance. However, the percentage of commission is negotiated and settled at a higher rate of 2.5%. Conclusion The above study elucidates in detail that a skilled human resource manger can be deployed in order to properly organize the workers to contribute to this specific process of budgetary planning. The current also stresses on the need of proper monitoring of the overall operation of the organization and evaluation of the same using different performance monitoring tools directed at cost minimization as well as profit maximization objective of the organization. The effective implementation program also can uphold the comprehensive strategic financial and the budgetary planning process. The line managers need to check the productivity of the function and the competence of the workforce to move up the efficiency in addition to the profitability of the company Big Red Bicycle Pty Ltd. However, the recognized skill gaps can be detected and bridged by means of apposite training initiatives (Cheng, 2012). The workforce can thereby be trained in order to add value to the human resource of the b usiness. Again, the reduction in the overall wastage of the business operation can increase the efficiency of the operations and at the same time lessen the cost of production, in that way increasing the profit of the company on the whole. Apart from this, the primary objectives of the preparation as well as the presentation of the budget can be met by way of appropriate assessment and implementation of the contingency plan imperative for mitigation of the anticipated risks that might be countered by the organization. References Bekaert, G. and Hodrick, R. (2014). International financial management. Harlow, Essex: Pearson. Bhimani, A. (2012). Management and cost accounting. Harlow, England: Financial Times/Prentice Hall. Brigham, E., Garpenski, L. and Daves, P. (2010). Intermediate financial management. Mason, OH: South-Western. Charupat, N., Huang, H. and Milevsky, M. (2012). Strategic financial planning over the lifecycle. New York: Cambridge University Press. Cheng, M. (2012). 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