Business finance is manage the money in an organize way to make more profitable. It includes financial statements and evaluate between the company profit and loss, balance sheet and cash flow statements. Business finance focuses on to earn more profit and to minimize the financial risk. In this report we discuss about TownScape plc company , this company is an international manufacturer of street furniture. In this report we discuss about purpose of budget preparing, budget process which can help in business development. And discuss the alternative methods of budgets and to choose which alternative method is appropriate of budgeting.
Purpose of preparing a budget
Budgeting: Budgeting is an integral part of a company, it is used for long term financial planning of a company . In budgeting process includes designing, implementing and operating budgets. Forecasting is to predict for those aspect which is related with it. The main purpose of budgeting is to plan different area of business and to ensure to control on it. The Townscape plc company main priority is the policy and objectives should be follow. This company follow some objective of budgeting are:
- To give a judgement about the organization future production, sales, and company expenses and to minimise the business losses (Cole and Sokolyk, 2016.).
- To evaluate the financial condition of the company and need of funds view to keeping the firm solvent.
- To allocate fix responsibility of departmental heads.
- To decide the the capital investment and availability of funds at reasonable price.
- And to coordinate with other departments of a company for achieving the objectives.
- The company main aim is to control on cash, inventory and sales.
- And the last objective of budgeting is to centralised control over the company.
Budgeting process company need to follow:
A good budgeting process incorporates with strategic planning and budgeted before expenses. Budgeting decisions are based on mission priority and accountability. Townscape plc follow some steps of budgeting process for developing the business, these are:
1) Update budget assumptions: in this step the company used the last budget details and then assuming for the present budget.
- Available funding: determine the fund amount which is available in the budget period.
- Create budget package: it includes the actual expenses which is used in a current year.
- Issue budget package: then the next step is to issue the budget where possible and answer any question.
- Obtain department budget in this step to check the errors and compare with others and if any changes in budget it should me change in this step (Kraemer-E and et.al. 2017).
- Obtain revenue forecast:in this they use the revenue information which is developing their budgets.
- Update the budget model : in this update the depreciation expenses , fixed assets and the capital budget information which is received
- Review the budget: This budget give to senior management team to review the budget. Also test the validity of the turnover ratios , inventory etc. if any modification in budegt it should be done in this process.
- Approve and issue the budget: after approving by management members , they create the bound version of budget and give copies to other (Kennickell, Kwast and Pogach, 2015).
- Verify and execute the budget: in this stage compare the budget into accounting and to adjust the errors and then last execute the budget to achieve the company goals to make more profit.
Budget process help in developing the business:
- Write it down: Most of the organisation uses budget process, but they do not written down the budget. If a company putting a process in a writing it creates a measuring tools from which we can monitor the progress and creates checklist throughout the process
- Decide who should be involved and when: All the executives and directors of a company play an important role in budget process. More efficient staff create a draft of budget process and and give to the committee members for reviewing the budgets.
- Establish an annualized timeline:In this the company set the annual timeline for budget process for each department to work on that process to achieve the objectives.
- List specific tasks with specific responsibility assignments: Many employee may contribute to the task and from those select one employee to lead the team and give responsibility to the other employees to completed the task on time .
- Ensure that budget line and accounting line items are in sync: A mismatch between budget line items and in financial accounting items it create extra workload of the organisation (Bendell and Doyle, 2017).
- Develop worksheets, templates and tools : If for preparing the budgets using the worksheet it is help to ensure nothing should be forgotten. In this worksheet they include general liability, directors, officers vehicle insurance, earned revenue details.