Nestle Budget Analysis

Management accounting involves forecasting and controlling budgets as it provides income for the achievement and performance of certain projects or business activities of Nestle. Budgeting is a detailed plan expressed in measurable terms that specifies how resources will be acquired and used during a specified period of time. It is vital to an organization as it allows them to have authority or control on their financial resources to balance out their expenditures to spend with their income. It also avoids the company to experience loss in their profits or outflows of cash. In analyzing the budget of Nestle, a preparation of cash budget should be made which could help the managements monitor and assess their flow of cash movement in the

There are ways to improve and develop the business and make appropriate decisions by controlling and monitoring budgets:

 Sustaining Nestle’s budgeted profit to avoid loss of profit.

 All budgeted costs must be reported in order to compare the budgeted and actual costs of Nestle to see what improvements should be made.

 Sorting out the cash budget for production and development for further improvements and developments of the business.

 The management must observe its cash control when spending on productions, research and development to develop and improve the company’s resources.

However, if Nestle’s budgets and costs are not managed well, this can affect the company’s profit. It can either gain profit or lose profit. Here are some outcomes that could happen if budgets and costs are not

If the total amount spent on a project is equal to or less than the amount budgeted, the project can be in trouble if the financing for the project is not available when it is needed. There are two types of reserves that the company may consider in reserving certain amount of cash for availability when in trouble.

Management Reserves

If something occurs during the project that requires a change in the project scope, money may be needed to deal with the situation before a change in scope can be negotiated with the project sponsor or client. It could be an opportunity as well as a challenge. For example, if a new technology were invented that would greatly enhance your completed project, there would be additional cost and a change to the scope, but it would be worth it. It can be made available at the manager’s discretion to meet needs that would change the scope of the project. These funds are called management reserves.

Contingency Reserves

Most projects may experience something unexpected that increases the costs above the computed estimations. If the estimates are rarely exceeded, the estimating method should be reviewed because the estimates are too high. It is impossible to predict which activities will cost more than expected, but it is reasonable to assume that some of them will. Estimating the likelihood of such events is part of risk