What is the process for preparing budgets or other financial plans?
- Identify the data to be collected.
- Identify the appropriate sources of data.
- Ensure currency, reliability, and validity of the data.
- Classify and code the data according to accounting and organisational principles.
- Calculate costs, and profit/loss analyses where needed.
- Assess the results of data analysis and provide formal or informal reports on your outcome.
- Keep accurate and secure records of financial transactions.
Historical data and reports from the organisation’s information system will contribute to the development of realistic and achievable budgets and to the design of financial plans for your team.
What two forms of budgeting might be used?
- Flexible forms – formulas that adjust expenses based on changes in actual revenue or other activities.
- Fixed – does not change or flex when sales or some other activity increases or decreases. Also know as, static budget.
Which form of the budget allows changes to be made?
Flexible budgeting allows for adjustments – if figures are dependent on other figures then it can be regulated if conditions change. However, only if designed to allow changes and adjustments to cost levels so they match the level of activity attained. It is purposeful to compare the actual expenditure which is measured against income. A great resource for business administrators is how to create a budget guide on the Busienss.gov.au website.
Explain how contingency plans work.
Contingency plans are put in place to address any unexpected changes that may occur. They are developed using a ‘What if’ scenario and created ahead of time to avoid any disruptions to the running of the business. It allows an organisation to resume its daily operation as soon as possible after a certain unforeseen event. Besides, the contingency plan will help to protect resources, minimizes the inconvenience of clients and assign specific responsibilities in the process of recovery. Another great
Why should the team or workgroup members be actively involved in designing and developing contingency plans? Contingency plans are put in place to address any unexpected changes that may occur. They are developed using a ‘What if’ scenario and created ahead of time to avoid any disruptions to the running of the business. It allows an organisation to resume its daily operation as soon as possible after a certain unforeseen events. Besides, the contingency plan will help to protect resources, minimizes the inconvenience of clients and assign specific responsibilities in the process of recovery.
How can employees be engaged in the preparation of financial reports, allowing details to be easily disseminated among team members?
A process of communication. The intended message must be communicated and filtered down through management and allow them to be presented with the opportunity to contribute. In addition, performance measures should be incorporated into their roles and responsibilities as they will add accountability and help drive a successful process throughout the business.
Why should employees be involved in setting and monitoring the budget?
It will enable a better understanding for all employees what the financial expectations are – what it entails such as overheads, wages, general costs etc. How they’re structured and implemented and how they’re monitored, evaluated, and maintained.
What is responsibility accounting and what is its importance to an organisation?
It’s allocating costs to specific areas such as departments, teams, sections, etc. Doing this gives a correct analysis of where the main costs are coming from and show how different areas compare. Further to this, it can give an indication of where improvements need to be made and what leeway areas have. Apart from that, it helps communicate the information needed by the owners and investors for the assessment of financial performance. On top of that, it provides relevant, accurate, timely information to the managers for them to make decision