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Key Weaknesses in Budgeting and Effective Financial Planning Question and Answer By Native Assignment Help.
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Budgeting, as well as planning, gives major support to work according to the strategic objectives that have been created by the manager. The company should make plans according to the needs of the project, it should include collaboration and an interactive budget and planning process. This process should be meaningful and it might work extremely beneficial for the company so that it could save time and money as well. It helps to fulfill the financial target that has been planned by the owner of the company.
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The amounts that have been shown in the cash budget that is not realistic. Preparing proper and meaningful weakness of estimating process leads to several revisions and accompanied. On the other hand, in order to identify the weaknesses of any company, the company might have lots of vital unspent provisions remaining at the end of every financial year (Cerezo-Narváez et. al. 2020). Control and planning of budgeting are vital visible applications of financial information in the “management control process”. Setting standards which are provided for feedback and performance standards by several reports. Budgeting is one of the vital works which consists of month-to-month or sometimes year-to-year information of budget planning. It basically defines a profitable budget planning that the company should follow to earn revenue according to its needs.
Here are five Inherent weaknesses that have been clearly seen through the method that has been used to make a cash budget.
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Order AI-FREE ContentFrom the graph, it is clearly seen that the production of the company's variable cost is increasing day by day which is a good sign (Pinneri et. al. 2021). If the future activity of the product reduces then the variable cost might get a chance to reduce. The variable cost is not a constant unit as it changes its units whenever new additional units are produced as well as sold from the business (Khoshnevisan et. al. 2021). The variable cost has never been constant. The per unit cost of the variable cost remains the same, on the other hand, it only changes when new units are sold or produced. As an illustration, a variable cost is the cost of wheat for a roti shop that produces roti daily (Tsang, et. al. 2021). The larger the number of products produced, the variable cost remains unchanged as the total wheat cost increases in that shop.
The production cost does not depend on the production quantity. The total of the fixed remains always the same, it remains unchanged when the manager takes proper information and the quantity of the item (Olivieri, et. al. 2019). In this case, the fixed cost is decreasing which means there is a major issue regarding information. “Cost behavior pattern” is renowned as a fixed cost. A fixed always remains the same, no matter if the production increases at a higher level (Vian, T., 2020). As an illustration, the salary paid to the workers of a bike company who are the main manufacturer of bikes is the fixed cost for the bike company.
Conclusion
To achieve security and success in business every business organization should create a budget as it is the main pillar of the business monetary structure. It helps to understand and observe the business's monetary condition and ability to perform tasks. Deciding to make a budget might help the company to make a financial decision easily. The crucial aspect of managing any business organization's finances is budgeting. Making proper budget planning, monitoring its performance as well as taking corrective and meaningful actions which are needed for a company might help to improve its work quality and save lots of unwanted things that impact badly for the company. It could improve the companies' forecasting and planning more efficiently which also improves financial performance.
References
Journals
Ahrens, T. and Ferry, L., 2020. Financial resilience of English local government in the aftermath of COVID-19. Journal of Public Budgeting, Accounting & Financial Management, 32(5), pp.813-823.
Cerezo-Narváez, A., Pastor-Fernández, A., Otero-Mateo, M. and Ballesteros-Pérez, P., 2020. Integration of cost and work breakdown structures in the management of construction projects. Applied sciences, 10(4), p.1386.
Khoshnevisan, B., Duan, N., Tsapekos, P., Awasthi, M.K., Liu, Z., Mohammadi, A., Angelidaki, I., Tsang, D.C., Zhang, Z., Pan, J. and Ma, L., 2021. A critical review on livestock manure biorefinery technologies: Sustainability, challenges, and future perspectives. Renewable and Sustainable Energy Reviews, 135, p.110033.
Maskuriy, R., Selamat, A., Maresova, P., Krejcar, O. and David, O.O., 2019. Industry 4.0 for the construction industry: Review of management perspective. Economies, 7(3), p.68.
Mork?nait?, ., Kalibatas, D. and Kalibatien?, D., 2019. A bibliometric data analysis of multi-criteria decision making methods in heritage buildings. Journal of Civil Engineering and Management, 25(2), pp.76-99.
Olivieri, H., Seppänen, O., Alves, T.D.C., Scala, N.M., Schiavone, V., Liu, M. and Granja, A.D., 2019. Survey comparing critical path method, last planner system, and location-based techniques. Journal of construction engineering and management, 145(12), p.04019077.
Oluyisola, O.E., Sgarbossa, F. and Strandhagen, J.O., 2020. Smart production planning and control: Concept, use-cases and sustainability implications. Sustainability, 12(9), p.3791.
Pinneri, C., Sawant, S., Blaes, S., Achterhold, J., Stueckler, J., Rolinek, M. and Martius, G., 2021, October. Sample-efficient cross-entropy method for real-time planning. In Conference on Robot Learning (pp. 1049-1065). PMLR.
Rostova, O., Shirokova, S. and Sokolitsyna, N., 2019, March. Management of project for automation of investment control at industrial enterprise. In IOP Conference Series: Materials Science and Engineering (Vol. 497, No. 1, p. 012017). IOP Publishing.
Saeidi, P., Saeidi, S.P., Sofian, S., Saeidi, S.P., Nilashi, M. and Mardani, A., 2019. The impact of enterprise risk management on competitive advantage by moderating role of information technology. Computer standards & interfaces, 63, pp.67-82.
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