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
A major component of this process is the use of a company budget. Managers typically use budgets as a financial map to help to alert them as to what future expenses for the organization may be. These budgets are usually based on the company’s financial past. Managers will look through this historical information to help create this budget for the company as a whole. Overall, this budget made will help the company save money and keep the company from making any unnecessary spending.
This is because a budget provides a road map for performance that offers detailed information about expected outcome that managers can use to guide decision toward desired goals. The first purpose of budgeting is planning. Planning involves developing goals and preparing various budgets to achieve those goals such as sales budget. As a manager looks forward over a period of business and prepares, he may consider how much material and staff is needed. When a budget shows expected sales over the same period, the manager can take budgeted cost of sales and work backwards to determine how much raw materials needs or labor hours required.
For instance, by identifying the costs and timing of capital improvements necessary to achieve targeted future service levels, a financial manager can help the retail management to get a better understanding of the results of the anticipated goals. (Nolan &Foran, 1983; p.437) Furthermore Christopher Bart () argues that budgets are essential to the management for effectively control of an organization. Budgets thus are the most important tools management has for leading a company towards its goals; in short budgets are required tools to “institutionalize” a company goals, monitor performances, and progress of both the business, and individual products; and vital to help measure the performance of managers” (p.285) An analysis of these resourceful clearly confirm the scope of budgeting as a potential financial tool for companies; they
The more challenging environment requires new solutions to match changing business setup and strategies. Here a company requires corporate finance advice. Corporate finance teams contributes in the well being of company by assisting company managers to take the right financing decisions in order to maximize the shareholder
So it has a lot of significant advantages, but also it is important to pay attention also on some challenges in cash budget. First of all, cash budget should meet all strategic goals that company is willing to achieve during certain period of time. It means that all inflows and outflows should be measured in terms of company’s clear strategy. Next is the lack of long-term forecasts. One of common mistakes is that companies emphasize more on short-term financial performance (example: company makes a cash budget referring on existed contact, customers, vendors and so on), that disturbs company to see all possible result in growing perspective.
If the company does not project the future sales of the company and determine a plan to adjust to the increase or decrease in supply and demand, then the organization could start losing money rather quickly. Aggregate planning allows management to see the trends of customers, which allows them to better plan supplies and sales accordingly. When an organization avoids aggregate planning and the supply is high and the demand is low, the organization will be left with a lot of products or service without anyone wanting to buy them. If that is the case, then the company has spent a lot of money on materials and labor to create the product but now they have a stockpile of one product when the demand from the customers is low, so they are not generating a profit. Also, if the service is in high demand and the organization does not have enough employees to fulfill the requests to the customers, then customers will be forced to take their business to a competing firm so has time and personnel to tend to their needs.
It is important that a business such as Brompton manage their resources and control their budget so that they can keep track of their financial situation. By having a business that is organized the company can run smoothly with limited problems. Controlling budgets means that business such as Brompton can make sure they do not fall into financial trouble. For Brompton to run efficiently without financial woes it must plan it financial activities in advance. Brompton will have to estimate and predict its financial income taking into account costs, this will be done using data from Brompton previous years.
There are not only is the financial element, and also included customers, business processes, learning and growth. Since the Balanced Scorecard method is presented, its comprehensive concept of enterprise assessment and long-term development concerns the full attention of the academic community and the business community, many companies try to introduce the Balanced Scorecard as a business management tool. There are some advantages of implement the Balanced Scorecard management method. First is to overcome the short-term behavior of financial assessment methods and concerted action of the entire company use the strategic objectives. Strategies into effective organizational layers will be organized for the performance indicators and actions.
Outsourcing is a business strategy that moves some of an organization’s functions, processes, activities and decision responsibility from within an organization to outside providers. In this competitive edge, companies have a lot of pressure to maintain their focus, flexibility, competence and be competitive in their cost. outsourcing addresses these needs by providing low cost specialized talent which is considered non-core to the business. Outsourcing can be used by management as a strategic tool to restructure the organisation. Outsourcing is subjective to the industry and the purpose for which the same is being undertaken, However across industries outsourcing is primarily undertaken to enable companies to generate better revenue recognition