Manage Budgets and Financial Plans Essay Example

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Manage Budgets and Financial Plans


The financial records taken for this review are those for a company within the technology industry. From the financial projections, the company has conservative sales in its products which after its entry into the market five years ago initially operating at a loss, the company has been able to revive its fortunes and start operating at a profit. The current financial situation of the company is very robust and fluid with the company having total liabilities of $1250 up from the $250 value it was when the company started operating five years ago (Williams, Haka, Bettner & Carcello 40).

These statements indicate that this company is a very ambitious company having started its operations virtually running at a loss for the first month where it cash flow from operations was less the income by $717,775. In the following years, the company grew its brand and mandate within the market making it profitable from sales and investment such that by the fifth year, it cash flow from operations was surplus by $2,846,774. This income revenue comes from two different streams; the products that the company sells, and the services that it provides to its clients. Among the products that are sold by the company include software developed (OBRA e-z and MasterLink) and the services given to its clients include licensing and maintenance services for the software and applications that are sold to the clients (Sample Budget 1). From the five-year income statements provided, sales from products and goods amount to $5,650,000 by the fifth year of operation which points to the stability and strength that the business has become over time.

Licenses and infrastructural development are the two areas that will dominate the projected expenditure for the company in future. Given that the company is within the technological industry where there is a lot of development and changes to the infrastructure involved in the business, it will require the company to invest more on technology in order to build its capacity to remain competitive in the market (Sample Budget 1). This can be well understood from the review and analysis of the cash flow statements for the company. According to these statements, the cash flow from operations in the first year was less by $717,775 and increased slowly to reach a high of $2,846,774. This increase is attributed to investment and funds from operations after tax returns which totaled to $3,306,746 in the fifth year of the business.

Based on the rate of expansion that the business is experiencing, the outright risks that can be deduced from the financial records regard sustainability and business viability. As is the case for any business model, the business should have good strategies that ensure that its expansion is not too much so as to overrun its operational capacity (Williams, Haka, Bettner & Carcello 42). In this regard, there is a risk of the business not being able to be overwhelmed with investment decisions which sometimes may overrun the viability of the business itself (Williams, Haka, Bettner & Carcello 46). This is the risk that this company faces in its future expansion and operations.


Budgeting is an important part of any business development strategy that ensures success of the business when it starts operating. According to Mortimer (14), the concept of budgeting is among the key attributes of business development that determine either success or failure of any business endeavor. For this assignment, a budgetary plan is provided for a new company that would want to start operations in software development in the US seeking to reach a specific segment of the market; the corporate branding business. The business will be marketing its new product, Cloud Computing Pro, an application that enables large multinational corporations to share databases virtually without the need for physical data storage devices for the same.

Goals and Objectives

The objectives of this business to create a greater awareness of the way IT services and products can be used to ensure success of businesses around the world. The new product suggested has the convenience of greater security and effectiveness in the management of corporate information across different networks. This does not come cheap. The whole project is quite capital intensive not only to set up but also to sustain over one year.

Purpose of the Budget

This budget plan has the two main purposes and these are:

  1. To estimate the amount needed to successfully start the new business in the market

  2. To estimate the amount needed to successfully run the business for a span of one year

Project Details

This project involves the development and popularization, Cloud Computing Pro, a new application that enables multinational corporations to share data virtually without the need for data storage systems. Burgers & Sons Co. Ltd which will be working on the development of this product has the capacity to ensure that the product is well customized to the needs of its clients within the market (Mortimer 13). In brief, the product operates on a similar concept as cloud computing where data can be shared and linked through an intranet system linking all the systems of an organization virtually and utilizing online storage facilities for the storage of the information. What is interesting about this project is that it does not entirely rely on internet connectivity as the application can access remotely connected information within the intranet independent of internet access.

Project Team

This project has six key players each of whom is responsible for a specific item on the budget plan. The first team member is responsible for the estimating consultancy services that are required to ensure that the project is complete. The second team member is in charge of product and brand development charged with the responsibility of ensuring that the product functions well and its brand is well developed within the market. The third team player is responsible for the marketing and promotion of the product to ensure that it reaches the audiences that is intended to reach adequately. The fourth team player is responsible for developing the website and instituting public relations to ensure that the project is a success. These team members do not necessarily need to physically perform their functions but have the liberty of outsourcing services that may not be their strengths and expertise. In this regard, they are ultimately responsible for developing the budgetary requirements and figures for this plan.

Key Tasks

The following are the key tasks for each of the member of the team:

  1. Researching on the requirements of a good budgetary plan

  2. Development of proper strategies for the implementation of the budget plan

  3. Developing recommended budgetary needs for their respective areas of focus

  4. Jointly coming up with the whole budget for the project

Project budget

The compiled budget is attached separately.

Budget Assumptions and Considerations

The following are the assumptions that are made for this budget plan:

  1. The product being introduced in the market is tested and approved from a users point of view

  2. It is estimated that the return on investment (ROI) will be 3.6% by the end of the first year and will range between 5% and 7% in the following year cumulatively

  3. The company for which this budget is prepared (Burger & Sons Co Ltd) already has the financial capacity to jumpstart the project and has a good reputation in the market in its focus project area

Monitoring of Project Expenses and Budget evaluation

Most of the expenses of this project are start up expenses which require a lot of commitment and focus in the way the money is committed. The success of the project will be assessed and evaluated based on the success of the implementation and the attainment of the set objectives and goals.

Contingency Plan

The contingency plan for this budget is to find alternative funding through a grant or loan to service the vote heads indicated on it.


Q1). Four basic accounting principles that business owners should be aware of in Australia

  1. Cost Principle – this principle requires that the actual costs incurred be recorded rather than values based on market trends during a financial assessment of a business performance (Epstein & Jermakowicz 932).

  2. Revenue Principle – this principle requires that revenue be recorded at the time it is earned and not the time a payment is received as this provides a clearer status of the financial situation of the firm (Epstein & Jermakowicz 931).

  3. Matching principle – this principle requires that expenses be matched to their respective revenue so as to have the best picture of the financial performance of the business.

  4. Disclosure Principle – this principle requires that all financial details that are made available by a company should be easy to understand and this should be done in view of the cost of providing such information with cost effectiveness in mind (Silveira, Birukou, D’Andrea, Worledge & Zouhair 524).

Q2). Six basic account types in Balance Sheet and Profit and Loss Statements

  1. Revenue – this records resources that come to the business

  2. Gains – this records the extra resources that contribute towards profits on the statement

  3. Expenses – this records what is spent within an organization

  4. Losses – this records the losses that are accrued within an organization

  5. Personal Accounts – this records personal costs within an organization

  6. Business Accounts – this records costs associated with the business in an organization

Q3). Two functions of financial management

  1. Estimating amount of capital required – financial management helps to give an idea of the amount of money required to engage in a business endeavor

  2. Determining capital structure – financial management helps to establish the credible avenues from which funding for business projects can be obtained (Silveira, Birukou, D’Andrea, Worledge & Zouhair 523).

Q4). Four legislative areas that can impact on financial management obligations of a company in Australia

  1. Financial Management and Accountability Act 1997 – this law governs the area of how companies are to manage their finances as provided by the law

  2. Lands Acquisition Act 1989 – this law governs processes of acquiring land in Australia showing how companies can acquire land in case of expansion and asset financing (Silveira, Birukou, D’Andrea, Worledge & Zouhair 563).

  3. Public Accounts and Audit Committee Act 1951 – this law governs the manner in which companies can run their financial proceeds especially those that are publicly owned.

  4. Public Works Committee Act 1969 – this law governs the overall manner in which Australian companies ought to conduct themselves in terms of business development

Q5). Key characteristics of a budget

A budget has the following goals and characteristics:

  1. It helps indicate the sources of Income

  2. It helps detail how expenditure is done

  3. It helps reduce discretionary spending

  4. It helps in the setting up of financial goals

Q6). Obligations of an organization to produce and keep financial records according to legislative compliance requirements

Organizations in Australia are required to demonstrate that they have adequate resources (both human and financial) to undertake their businesses of interest. In addition to this, these organizations are required to have risk management systems with appropriate expertise to manage and run their businesses satisfactorily (Silveira, Birukou, D’Andrea, Worledge & Zouhair 539). This is important since their lack can cause an organization to be deregistered or suscepted to other punitive measure by the compliance regulation agency in the country.

Works Cited

Epstein, Barry & Jermakowicz, Eva. Interpretation and Application of International Financial Reporting Standards. John Wiley & Sons. 2014. Print.

Mortimer, Daniels. Corporation Financial Statements. New York: New York: Arno Press. 2013. Print.

Sample Budget. Software Development Budget. 12 August 2010. 1 November 2015. < Financial-Projections.pdf>.

Silveira, Rodriguez, Birukou, Casati, D’Andrea, Daniel, Worledge, Valarie & Zouhair, Toney. Aiding Compliance Governance in Service-Based Business Processes. New York: IGI Global. 2013. Print.

Williams, Jan, Haka, Susan, Bettner, Mark & Carcello, Joseph. Financial & Managerial Accounting. McGraw-Hill Irwin. 2012. Print.