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  • Subject area(s): Marketing
  • Price: Free download
  • Published on: 14th September 2019
  • File format: Text
  • Number of pages: 2

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Task 1

1. Create a portfolio of evidence containing the key planning and budgeting documents for your organisation/business unit for a current or recent period. Include:

• statements of mission, goals, objectives:

• key performance targets (and those accountable for their delivery)

• pro-forma financial statements

• operating budgets

• finance budgets and expense budgets.

2. Draft a brief description of each of the assembled documents, noting their purpose, the main information elements within them and the linkages from one document to another. Also include a description how you and others contribute to the creation of these documents and how you and others use these documents for business planning.

3. Using a recent report detailing actual performance versus budget, provide a commentary on the results, explaining major variances and making recommendations regarding corrective action.

1. Please see the attached documents for the portfolio of evidence:

• Vision, Mission, Goals, Objectives (doc) – This document covers the vision, mission, goals and objectives for the company.

• KPI Template (doc) – This document covers the key performance indicators for each team member.

• Manage Finances Budget_Accts_150715 (excel) – This document covers pro-forma financial statements, operating budgets and finance budgets and expense budgets.

2. Brief description of each of the assembled documents:

Statements of mission, goals, objectives

The mission, goals and objectives are taken from ABC Training's strategic plan and show what the company as a whole would like to achieve within that period of time.

Mission Statement:

The mission statement reflects every facet of your business: the range and nature of the products you offer, pricing, quality, service, marketplace position, growth potential, use of technology, and your relationships with your customers, employees, suppliers, competitors and the community. ABC Training's mission statement reflects the desire to excel within their field by:

• Demonstrating that ABC Training is beneficial to their organisation (improve and engage your people),

• Understanding the needs of the organisations, and

• Developing productivity through high energy, interactive and customised solutions.

• Goal Statement

The Executive Leadership Team sits down and discusses the direction for the company and effectively brainstorms the above points until a consensus can be achieved. The CEO then presents this to the Board for approval.

Key performance targets (and those accountable for their delivery)

Key performance targets are a set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their strategic and operational goals. Key performance targets vary between companies and industries, depending on their priorities or performance criteria.

Most businesses set strategic goals they desire to achieve. One way to measure an organization's progress toward achieving these goals is to use key performance indicators. For example, a company has a goal to reduce defects on its production line from 5 percent to 1 percent. In order to know whether it's achieving its goal, the company establishes a KPI called defect rate. The defect rate KPI measures the number of defects produced before and after implementing any process improvements. Without implementing the KPI, the company would not have precise data to know if it has achieved its goal.

Key Performance Indicators are created by the State Managers and are driven by the program managers. This ensures that the KPI's are in line with the company's strategic direction and are achievable (if not slightly challenging) for the staff.

Pro-forma financial statements

Pro forma financial statements are the complete set of financial reports issued by an entity, incorporating assumptions or hypothetical conditions about events that may have occurred in the past or which may occur in the future. These statements are used to present a view of corporate results to outsiders, perhaps as part of an investment or lending proposal. A budget may also be considered a variation on pro forma financial statements, since it presents the projected results of an organization during a future period, based on certain assumptions.

Operating budgets

An operating budget is a combination of known expenses, expected future costs, and forecasted income over the course of a year. Operating budgets are completed in advance of the accounting period, which is why they require estimated expenses and revenues.

Components

Operating budgets are focused on facilitating income. The first and perhaps most crucial component of the operating budget is the sales and collections budget. This is followed by the projected cost of goods sold budget, the inventory and purchasing budget, and the budget for operating expenses.

Content

Operating budgets are generally based on projected quarterly performance. Much of the challenge in formulating a valid operating budget is to learn from historical performance, and then factor in the probability of additional costs or market variables. An organization may decide to create more than one operating budget. As an example, it may be helpful to plan an appropriate budget for an unforeseen drop in revenue, as well as a budget for more positive scenario. The alternative views provide a game plan for more than one business environment and can assist in decision making.

Finance budgets and expense budgets

Financial budgets are financial plans that are structured to detail projections on incomes and expenses on both a long-term and a short-term basis. Budgets of this type normally incorporate aspects of other types of budgeting strategies, including the preparation of a detailed budgeted balance sheet, a section that functions as a cash flow budget and addresses the receipt of income and the flow of expenses on an annual, semi-annual, and a monthly basis. It typically covers a period of at least one year, although it is not unusual for some organizations to prepare this kind of budget to cover anywhere from two to five years at a time.

Operating expenses are defined as non-capital expenses (non capital operating costs) incurred by a company in normal operations, such as salaries and wages and floor space rental. In brief, almost all routine expenditures a company makes in operating a business are operating expenses, except for a few special non-operating expenses such as loan financing costs or one-time plant closing costs, and except for capital spending (see assets and capital budget).

Operating expenses typically represent spending for such things as:

 Employee salaries/wages and overhead  

 Office space rental and utilities costs

 Employee travel and training expenses

 Computer hardware and software maintenance contract expenses

 Marketing communication / advertising expenses

 Telephone and internet services

 Insurance costs

 Outside consultant fees

The Executive Leadership Team sits down and discusses the budgeting requirements for their respective programs. This budget is then handed to the finance department who put the document together for the CEO to present it to the Board for approval.

3. Using a recent report detailing actual performance versus budget, provide a commentary on the results, explaining major variances and making recommendations regarding corrective action.

Performance versus Budget

Item Variance

Income -7%

Cost of Sales 17%

Accounting Fees 496%

Advertising 24%

Cleaning 253%

Couriers -47%

Filling Fees 427%

Insurance 9%

Postage 2%

Telephone -4%

Utilities -13%

Commentary and Recommendations

Overall: ABC Training has gone through a year of change and restructure that was entirely expected. This has reflected in the Performance versus Budget table above especially in the areas of accounting fees and filing fees which saw the actual cost blow out by 5x and 2.5x respectively.  These further highlight the issues of a lower than expected income and higher cost of sales.

Income: ABC Training has seen a 7% drop in the total income received, this has been caused by unexpected restructuring of the company at a top level. Whilst the change did not directly affect the staff, the disruption that it caused is still evident.

Recommendation: In order to nullify the effects of any residual effects the Executive Leadership Team need to be more open with their communication and line managers need to ensure that the messages are being relayed to the staff.

Cost of Sales: Whilst the overall income dropped, the cost of sales increased due to having to have trainers travel to locations where we had lost trainers. This was an unforeseen circumstance and the decision was made to continue with the deliveries instead of withdrawing.

Recommendation: ABC Training needs to invest in a recruitment drive to find a more geographically diverse pool of trainers. This will reduce the need for the additional travel and will further reduce the cost of delivery.

Overheads: Whilst there have been some areas of cost reduction (couriers, telephone and utilities) the budgetary ‘blowout' has all but nullified these savings.

Recommendation: Whilst some of the additional expenditure was a one off effect (moving an office which requires extra cleaning) it does make sense to re-evaluate the cost/benefit of the current providers.

Task 2

1. Create an integrated plan and budget for a real (or imaginary) project of interest to you. Set three or more performance targets, including at least two financial performance targets, by which eventual achievement of the project objective(s) will be assessed.

2. Include in the plan budgets covering capital expenditure, cash flow as well as the operating (profit and loss) budget for the period. (This will normally involve the production of spreadsheets showing the monthly budgeted figures.) Detail any assumptions adopted in the creation of these budget.

3. Identify the major risks to the achievement of the financial targets and strategies for the monitoring and control of the project.

4. Show how support for the plan will be secured and detail the process by which actual performance will be assessed against the plan and budget.

1. Create an integrated plan and budget for a real (or imaginary) project of interest to you. Set three or more performance targets, including at least two financial performance targets, by which eventual achievement of the project objective(s) will be assessed.

Please see the attached documents:

2. Include in the plan budgets covering capital expenditure, cash flow as well as the operating (profit and loss) budget for the period. (This will normally involve the production of spreadsheets showing the monthly budgeted figures.) Detail any assumptions adopted in the creation of these budget.

Please see the attached documents:

- Project

- Project Budget

3. Identify the major risks to the achievement of the financial targets and strategies for the monitoring and control of the project.

Please see the attached document; Project section 6. – Project Plan.

4. Show how support for the plan will be secured and detail the process by which actual performance will be assessed against the plan and budget.

In order to achieve the objectives of the project, the project manager will have to secure the support of the Stakeholders and the team who are working within the program. To achieve this it is important to seek their support separately.

Stakeholders:

Focus on results – It is important to include/answer relevant questions such as:

• Change - How does this project represent a change to this group?

• Goals - What are this group's goals and objectives?

• Fears - What fears does this project present for this group?

• Risks - What risks does this project pose for this group?

• Communication preference - Does this group want the big picture, face- to-face meetings? Or does this group prefer lots of data and time to mull it over?

• Needs - What are your needs with regard to this group? Do you need cooperation, resources, commitment, or an understanding of how this project fits into this group's plans for the company?

• Shared interests - What areas of common interest do you share with this group? Research shows that simply citing mutual interests at the beginning of a discussion increases the likelihood of agreement.

• Format - What format will your communication take: weekly meetings, training classes, quarterly presentations, or focus groups?

• Feedback - How will you get feedback from this group? Use the feedback to correct your course of action.

Team:

When gaining support from the project team it is important to deliver the following information:

• the objective of the project

• what the end result should look like

• why it is of value to the organisation

• what approach the project will take (focus areas, work streams, timing, technology, techniques, etc)

• the style and culture the project team is expected to adopt

• why each individual's co-operation is vital and of great value.

As this project will be a payment by outcome project the overall success is closely linked to the financial targets that have been set. Achieving the financial targets = correctly servicing the clients. This makes the program relatively straightforward to assess the performance o the project against the plan and the budget. The project will have formal reviews on a quarterly basis with informal reviews to be done by project staff on a monthly basis. There are however; some factors that will need to be monitored separately. They are:

• Office expenses (stationary, rent, utilities, etc),

• Employee leave (annual and sick),

• Stakeholder feedback (complaints, issues, etc), and

• Client engagement.

The reason that the factors will be measured and monitored separately is because the pose an indirect risk to the outcome of the project. For example if the office expenses are to high the project could fail to meet its financial targets and would be operating at a loss even if the project achieves it service targets.

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