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Business finance is considered as the employment of the credits and money in the operations and services of a business. Although there are various types of funds available in the market but all of them can be involved in the operations of the business finance. At the time of managing all the accounting and financial factors of an organization, the involvement of business finance can actually help in managing it in a way that it can seem much more profitable (Lowe and Tinker, 2015). The report is about the purpose of making budget and how it can help in TownScape. Also, it involves all the essential factors such as cost drivers etc. Alternative budgeting methods along with its potential has also been included in the report.
Purpose of preparing a budget and functions
A budget is considered as a plan that is associated with financial factors and it is specified for a particular period. Usually, the budget is meant for the time period of a year. This may involve various factors such as costs, flow of cash, revenues, quantity of the resources used etc. There are various reasons why a budget is being prepared and all these are discussed as under :
Income and expenditure forecast
Budgeting is classified as one of the very important aspects of the business. So, it is important that TownScape also ensure to make a proper and structured budget. A pre budgeting by TownScape can help them in analyzing the performance rate of the business. Also, it can help them in evaluating all the analysis of the internal processing such as finance, events etc. Thus, decreased rate of profit or revenues can help them in expecting the future condition of their business. So, it is important that they take proper preventive measures so that they can control any further threats or issues.
Efficient decision making tool
An efficient budgeting can help TownScape in a structured framework which further leads to an appropriate and efficient decision making process (Dudin, Kucuri and Namitulina, 2015). For maintaining the balance between different operations, TownScape can ensure to develop a proper decision making process in which all the employees of the company can talk about the current trends and issues and on the basis of them, can conclude to some better strategies and ways that can help TownScape in managing all the operations, risks, expenditure etc.
Monitoring the performance of the business
It is also considered as another essential tool. In this, TownScape has to make sure to analyzed the actual performance rate of the business with the forecasted one. It helps them in analyzing that to how much rate, they have gained profits or have lose the shares etc. After a well analysis can be made by the TownScape, they can take any further decisions that can help the company in achieving all the targets and goals and that too at a much higher extent.
Budgeting Processes for TownScape
TownScape needs to follow a proper and structured budgeting process for making the financial and operations associated with the expenditures etc. appropriate enough that helps in developing the operations and functions of the process.
- TownScape can ensure setting goals that are actually realistic. It is because setting goals that can be fulfilled in assumptions only can only waste the time of the company. So, it is very important that TownScape set goals that they can actually achieve.
- The second stage is to analyze the income and financial status so that TownScape can analyze that how much they can spend for the processing of different operations. It is because the company should know their expenses so that on the basis of that only, they can make the involvement of the processes.
- The third step ensures the fact that TownScape should know the difference between their requirements and wants. On the basis of their wants, they should not involve any such process or operation that can actually disappoint their customers or their employees. It is because a little disappointment can also throw a much negative impact on the productivity rate of the company (Galbraith, 2014).
- Designing the budget can be considered as the next step of TownScape. In this they can ensure that they spend less than what they have achieved because if they have to spend more than they have achieved, this means that there are some need of making modifications and improvements in their processing. Then, making their plan active to run the further processes can help TownScape. Also, these factors can help in the overall development of the company to a huge extent.
Essential cost drivers for TownScape
There are some specific areas where the cost budgeting can term most effective. Cost drivers are considered as the factors that helps in maintaining the expenses of the procedures and operations of TownScape. It can involve all the associated aspects such as labor costs etc. There are various cost drivers that can be involved by TownScape and these involve employee headcount, total number of leads required etc. These can help the company in analyzing their financial status in the market place. As the competitiveness has been increased to a huge extent, it is very essential that TownScape can make sure to involve essential cost drivers so that they can become able enough to maintain all the expenditure in a way that it can directly or indirectly help their business to grow and expand, thus gaining a higher rate of productivity as well. Involving traditional budgeting in TownScape can actually help them as this method of budgeting is termed to be easy to use, thus also, it helps in maintaining a sort of balance between different operations. The actual forte of involving this budgeting way is to increase the profitability and decreasing the losses. Cost budgeting is also being used in TownScape because it involve various ways and factors with the help of which, the actual cost can be controlled and the expected rate of the outcomes can increase as well. Also, it can help them to involve various strategies and ways that can further help them in gaining an increased arte of profits and also make them capable enough of achieving all the outcomes and targets. The only factor that is need to be ensured is that in case of the cost budgeting, there are two factors of which TownScape should take care of and these involve cost, expenses etc. It is because cost and expenses in an appropriate way can help TownScape to manage all the financial status along with the expenditure that can help the operations to develop at a much faster rate.
Appropriateness of traditional budgetary system in TownScape
There are various budgeting activities such as zero based budgeting etc., but on analyzing all these methods, it has been observed that traditional budgeting can actually help in minimizing the rate of loss in the productivity as well as in case of competing with the other competitors etc. in the market place. It can be considered as one of the effective ways by which TownScape can get developed enough (Miller, 2018). In case of the time and allocation of the resources, it has been analyzed that the time consumption of the system is quite much in some factors. Also, the results and outputs can be inaccurate as well. Thus, they can also make involvement of some other budgeting system such as zero budget or activity based budgeting. In case of the activity based budgeting, it helps in providing a sort of transparency in the budgets which means that it is clear enough that what is the actual and current position of the budget of TownScape at present.
So, when there is an availability of enough transparency, then the factors can stay more clear to the people. Activity based budgeting also helps in providing an increased rate of control which means TownScape can act able enough in managing and maintaining a sort of balance between different operations and functions. The whole budgeting can help TownScape in analyzing their actual position in the market, so that they can further make modifications and improvements that can prove beneficial for the company.
Alternative budget methods explain how each method attempts to improve on the traditional approach and what their respective drawbacks.
Budgeting method and target market methods which helps company to implement the resources in best possible manner. The TownScape Plc needs to choose this appropriate budgeting method for their company to make more profitable growth and target market goals (Diebold, 2015). There are different methods of budgeting which discussing below.
it is the budgeting method which helps to manage the budget of the company. This method is helpful to update the budget in continuous manner and this should be revaluated are reforecast throughout the year. This process also includes the re-evaluated the re forecast throughout the year. Every organization aims to expand their business into new existing manner. Rolling budget method helps to set the company budget in monthly, quarterly or annual basis. Rolling budget is more benefited at the time when project includes few people in the project.
Zero base budget:
Zero base budgeting includes the preparation of operating budget on the assumption. In this budgeting method all the expenses for the new period are calculated on actual expenses which is held during the year. This budget is prepared on the basis of without consider the last year budget. In these types of budgeting allocation of resources is based on needs and cost of the department. Zero based budgeting makes that every process on the basis of their given budgeting process. This budgeting process helps to make the budget on zero basis. It is totally based on zero and waiting what will going to be happen (Kraemer-Eis, Botsari, Gvetadze, 2017).
Activity based budgeting:
this budgeting is to design to provides transparency into the budget. Under which revenue generates from research activities. This budgeting process generally adopted by new companies. This budgetary process is very much helpful for those organization who newly start the business or new subsidiaries business locations. This process allows for more control over the budgeting process. This budget is highly costly as compare to the traditional budgeting besides, this process involves or getting more resources for effective management.
Traditional budgeting is the old version of budgeting who take much time and allocation of resources not properly done. In traditional form of budgeting it involves high probability of human error. In the form of results, it may have the possibility of human error and not accurate formulations (Peirson, Brown, Easton, 2014). Traditional approach is less productive and result oriented. In traditional budgeting results are inaccurate and unreliable results. Strategy of company. Traditional budgeting is taken long term or process through company get their results in very long term.
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Methods of examples of budgeting could be performed more effectively using an alternative method.
A good budget is more powerful and impactful on the business activities. It will be more powerful and growth-oriented goals which makes best approachable goal-oriented task for budget making. This will be the best approachable and goal-oriented task which helps to fulfill the best productive potential task-oriented goals and objectives. Company also needs to acquire and take participation of elements of budgeting for preparing the budget process in more flexible manner (Titman, Keown and Martin, 2017). Following elements are income, flexible expenses, unplanned expenses and general savings of the company. The main potential income process is income without which company cannot make budget process. If company fails to adopt this process it will not be more focusing and impactful for the further development growth. For example, company receives an order for selling so it set the cost which includes all manufacturing cost. This cost is based on per unit of the product. The Townscape Plc company zero based budgeting to make better budget target goals to achieve in order to get the best approachable target market goals. Besides, it will be more grateful for the company future profit. Best alternative solution provides better opportunity. Along with that, it will be more grateful and impactful organization goals through adoption of better opportunity and growth by adoption zero base budgeting process. The Townscape Plc company used zero base budgeting method for making better budget opportunity and growth for the organization. It also makes the process more converting and effective manner of growth. They always need to maintained the long-term process of making good task-oriented process of making good skills and wants (Titman, Keown and Martin, 2017). Apart from that, it also helps to manage company expenses and income process.
Analyzing whether one of these methods or a combination would be more appropriate to the company.
Zero base budgeting is the more appropriate and reliable for the company budgeting. Townscape Plc Company should adopt this budgeting method for their company operations. This budget process starts with zero with new decision of the new year. This process will not take previous year data for their budgeting process. Zero based budgeting process will evaluate the long-term process to calculate all data or expenses for the next year. All the functions of an organization are analyzed for its needs and costs. Zero base budgeting allows top level strategy goals to implementing it budgeting. In this process cost should be divided into groups it will evaluate previous year data and current expectations. Zero base budgeting is the long-term process which identify the task and best approachable goal-oriented task. Moreover, this process helps to evaluate the solution of alternatives sources of funds. This also based on some budget process to make the effective management goals and objectives on the basis of set evaluation process (Kraemer-Eis, Botsari, Gvetadze, 2017). This is the best budgeting method through company can make best approachable budget for the company betterment it also helps to make the best approachable task-oriented budget goals. It also very much required for the company to adopt best approachable target market goals to accomplish the moreover task-oriented goals. So, zero based budgeting is the more powerful and productive manner to get the best approvable goals and task-oriented method.
It can be concluded from the report that there is a need of developing a budget in TownScape because it can actually help in maintaining the processes and operations of the company at a much higher rate. Also, there are various aspects of budgeting that TownScape can involve and it can help them in an increased ate of popularity and productivity as well. importance of cost drivers have also been included in the report. Alternate budgeting methods that can be involved by TownScape have also been included in the report.
- Diebold, F. X., 2015. Forecasting in economics, business, finance and beyond.Department of Economics, University of Pennsylvania.
- Kraemer-Eis, H., Botsari, A., Gvetadze, S., 2017.European Small Business Finance Outlook: December 2017(No. 2017/46). EIF Working Paper.
- Peirson, G., Brown, R., Easton, S., 2014.Business finance. McGraw-Hill Education Australia.
- Titman, S., Keown, A. J. and Martin, J. D., 2017.Financial management: Principles and applications. Pearson.