Manage Budget Financial Plans | Assignment Help
Monitor and Control Finances
For BRB it is very important to monitor the expenditure which is not just comparing the expenditures with the budgets but also it is important to see changing patterns that need corrective measures. For BRB there should be measures in place in order to monitor work’s team reports against budgets and regular objectives have to be there at different intervals.
Operational Processes for monitoring actual expenditure
After the implementation of a budget/financial plan it is essential that actual expenditure should be monitored and control costs across the financial activities of the work team.
The organizational processes which BRB can use to monitor the work team’s reports on actual expenses incurred in a performance of their financial functions are:
- Checking bank statements
- Using financial reports
- Collection of invoices and receipts
- Use the petty cash records
- Use of excel based record
Steps which can provide feedback on team’s expenses
Steps or processes which can be used by BRB management to provide feedback on the team’s expenses are (Financial and Budget Management Good Practice Guidance, n.d):
- Budget should be prepared on a monthly or weekly basis
- Actual expenditure results should be compiled to date
- BRB must know its commitment to future expenditure
- BRB must know the balance of how much annual budget is remaining
- Variance analysis
Cost Control processes
- Monitoring all the costs incurred: BRB should need to be tracked the actual costs against the annual goals set in the budget. Such goals may be monthly or weekly, or even years if the project lasts for a long time.
- Managing the time of the project in an effective manner: Time management is important because if the actual costs starting to rise so it means that the BRB production manager is unable to meet the production deadlines.
- Use the information reports which may able to control the costs such as assets, income or wastages in production, etc.
Contingency plan
If the actual plan doesn’t go as planned or if there are any failures in the production department so the business brings out the devised plan which is known as a contingency plan. The purpose of contingency plans is to minimize the effect of failure or damages of production (Walsh, 2012).
There are processes through which contingency plans can be modified:
- Program management: If BRB is implementing the contingency plans so it needs to gather the team or include at least one representative from each department of the company like the directors or managers so that they would decide the objectives.
- Planning: The team will make devised a plan through risk management process or business analytics.
Variance analysis
Variance analysis is an essential part of the production department of BRB which can compare its actual data to its budgeted data. There are three ways thru which variance and overruns can be identified (Top 3 Ways to Report your Variance Analysis in Excel, 2018):
- Budget v cost report: budget data is one column and actual data is one column of the spreadsheet. For good measure, add some extra columns, mix it up with some color and it will look like this:
- Comparison between actual and budget data: enter the formula which can calculate both the variance and overruns.
- Forecasting: weekly variations year to year and year end prediction
Review Variances
Variance and overruns
BRB scenarios for account variance (values which comes less planned):
- Sales variance: when the actual volume is lesser than budgeted due to less demand for a product.
- Direct material variance: when the actual price of material is reduced due to decrease in import taxes.
- Labor variance: when the actual hours of production is not fully utilized as compare to planned hours.
BRB scenarios for account overruns (values which comes more than planned):
- Direct material variance: when the price of the material increased so there will be overrun
- Labor variance: when labor demand high wage rate so actual labor costs will be higher than budget.
- Variable cost variance: utilities per unit cost might be increase like electricity unit cost might be increased by the government so there will be overrun
- Fixed overhead variance: unexpected increase in rent of the production house
- Schedule variance: production unable to meet deadline so project costs will be increased
Planned value management
The accounts that are under and over the planned values, the original planned value and the actual costs are:
- Cost variance
- Schedule variance
- Schedule performance index
- Cost performance index
- Estimation during completion
- Complete performance index
- Project cost
- Budget to complete
Adjustment in contingent plan
The contingency adjustment which the BRB can implement in order to meet its financial reports are:
- Reducing the wages of the labor
- Increasing sales by reducing sales price
- Leased the equipment which might be used in production
The table shows the new master budget after implementing a contingent plan and in this new master budget the sales have been increased and wages have been reduced which brought the Net profit after tax to around $1000,000.
Improvement and modifications of monitoring process
Furthermore, BRB should undertake some monitoring process to ensure that the modifications are sufficient or that will be able to achieve financial objectives so the monitoring processes which BRB can undertake are:
- Reviewing the accounts on the weekly basis so that they everything would be going as planned
- Stock checklist should be there
- Team performance should be reviewed on weekly basis
In BRB there should be the internal processes and policies for reporting on the variances in the budget / financial plan of the department, the adjustments and contingency measures adopted, and the mechanism for receiving consent from the required personnel. Moreover, the reporting process should be realistic and in that report the roles and responsibilities should also be mentioned.
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