Question

How can you analyze the current budget of a company by preparing an analysis of the financial results with specific emphasis on positive and negative variances and propose possible managerial actions to correct these variances?

Answer 1

BUDGET

BUDGET IS THE PROCES TO CONTROL AND ANALYSE THE SITUATIONS AND PREDICT THE RESULT IN FUTURE. BUDGETING IS THE FUNDEMENTAL PROCESS OF ALL INSTITUTION TO MAKE A POSITIVE RESULT.BASICALLY BUDGETING HELP TO MAINTAINING COMFORTASBLE SITUATION IN THE ORGANISATION.BUGETING IS THE TOPLEVEL PROCESS TO DETERMINE AND PROTECT ORGANISATION GOALS.

THERE HAVE KEY ELEMENTS IN BUDGFETING ARE AS FOLLOWS

-PLANING

-TRACKING

-CONTROLING

-SUPPORTING FUNDING REQUESTES

HOW ANALYZE CURRENT BUDGET

STEP 1 : REVIEW OF BUDGET : MAKE A DEAILED STUDY ON BUDGET WHICH ALREADY PREPAIRED TO ATTAIN GOALS OF ORGANISATION. THIS HELPMAKE A CONCEPT ON THE EXPENCES WHICH SHOULD BE HAPPEN IN THE FUTURE.

STEP 2 :UNDERSTANDING ACTUAL SITUATION: MAKE FUNDEMENTAL CALICULATION ON ACTUAL EXPENCES RECORDED IN THE FINANCIAL DATAS FOR EXAMPLE REVIEW THE POROFIT AND LOSS ACCOUNT TO UNDERSTAND EXPENCES WHICH MADE FOR THE CERTAIN PERIOD AND REVIEW BALANCESHEET TO ANALYSE THE CHANGE OF EXPENCES AND GAINS COMPARING WITH BUDGETED DATAS.

STEP 3 : DECISION MAKING :THIS IS THE ESSENTIAL STEP THAT REVEAL THE ACTUAL SITUATION ABOUT THE PROJECT WHICH IS FOLLOWING THE BUDGET OR NOT

NEGTIVE AND POSITIVE VARIENCE OF BUDGET

POSITIVE : PROJECT IS UNDERGOING AS PER THE BUDGET

NEGTIVE : PROJECT MAKING DEFERENTS FROM BUDGETED CALICULATIONS

PROFIT OR LOSS ON PRJECT = BUDGETED AMOUNT -ACTUAL AMOUNT

POSSIBLE MANAGERIAL ACTIONS TO CORRECT VARIENCES

CONTROLING IS THE GOAL OF BUDGETING AND IT HELP TO ATTAIN GOALS

-EVALUATE THE OVER EXPENCES IS THE CORE PROCESS TO BALANCE ACTUAL WITH BUDGET. FIND OUT THE EXPENCES AND REASONS TO MADE DEFERENCE ON BUDGETED AMOUNT

-REDUCE THE EXPENCES : THERE WILL BE HAVE OVER EXPENCES WHICH MAKING LOSS. THE SECOND STEP IS REDUCE THE COST OR FIND ALTRANATIVES TO BALANCE BUDGET

-REMOVE LOSS MAKING PROCESSES: A MANAGER SHOULD BE CARE ABOUT ALTRANATIVES AND REMOVE PROCESSES WHICH CONTINUESLY MAKING LOSSES

-FIGUREOUT CURRENT SITUATION: SOMETIME THE OUTSIDE SITUATIONS MAY BE CHANGED IN A SHORT PERIOD. FIGUROUT THE SITUATIONS FOR EXAMPLE CHANGING LAWS, RATE OF MATERIALS AND VARIABLE COSTES

-ALWAYS CARE ABOUT NEW OPPERTUNITIES: MANAGER SHOULD CARE ABOUT ALTRANATIVE SOLUTION FOR THE LOSS MAKING PROCESSES

CONCLUSION

ANALYSIS ON BUDGET TO HELP FIND THE ACTUAL SITUATION COMPAIRED WITH BUDGET BY USING FINANCIAL DATAS.ACTUAL RESULT SOULD BE UNDER BUDGET TO MAINTAIN SMOOTH RUN AND ATTAIN GOALS OF THE FIRM.A MANAGER ALWAYS CARE ABOUT SITUATIONS AND REMEDIES ON HIS HAND FOR PROBLEMS.IT HELP TO MAKE ADVANTAGE ON BUDGET