Business Intelligence & Data Analytics Assignment

In this report, the merits and demerits of various planning tools helpful for budget control are shown. However, analysis of financial issues that arise in an organisation is done by making comparisons among other companies.

Different planning tools used for budgetary control with their advantages and disadvantages

Budget: These are the expected costs which are required by the various departments and processes in order to perform their tasks effectively without any problems in the cited firm. It is also defined as the assigning funds to the different processes after evaluating the expenses and profits of the last year (Ward, 2012.).

Budgetary control: It is the process of controlling the different allotted budgets to the various processes. This is done by comparing the actual and expected outcomes to determine whether the budget is strictly followed or not. It is useful for INWIDO company to identify the gaps in their budgets and performance and then implement suitable policies and strategies to eliminate such gap in future.

It is crucial for INWIDO company to control and regulate their budgets for different processes in order to enhance their profitability and efficiency. A budget control plan needs to be implemented successfully based on the requirements of the various departments to ensure that the activities are carried out smoothly. Different tools for budget control are given below:

Forecasting tools: It is helpful for any organisation to determine future scenarios using past and present changes in the trends. The gathered data is reliable and almost accurate as it is collected from both internal and external departments. INWIDO company can use this to determine the future trends which can adversely affect the company in future (Soin and Collier, 2013).

Advantage: It gives valuable insights into the business in order to make judgements regarding the betterment of the company.

Disadvantage: The nature of the future is dynamic and can't be accurately predicted.

Contingency tools: This tool is used for identifying the risky factors which can influence the company's growth and operations in the future time. This tool is useful for INWIDO company in evaluating the profitability and performance of the different operations of the company, INWIDO company needs to analyse such factors and implement suitable strategies for overcoming them in future.

Advantage: It provides extra resources when any problem arises in business operations related to existing resources.

Disadvantage: This tool is expensive and takes much time to implement.

Scenario planning: It provides the structured path to execute the strategic planning of a firm. This is useful for assuming the effects of the working environment in the firm. INWIDO company should use this for identifying the possibilities which can affect the process of the company in future.

Advantage: This tool can be adjusted according to the aroused situation and is very flexible to use.

Disadvantage: It takes a large amount of time during practicals.

Types of budget techniques

Budget is very important for any organisation to perform their various operations of different processes effectively without any problem of money involved (Senftlechner and Hiebl, 2015). Various types of budgets used by the INWIDO company are discussed below:

Production budget: It is the budget which is utilised in the production activities of an organisation. It includes various costs such as production, transportation, supply, promotion etc. which are used in the production of products and services. This budget is often categorised into different budgets like raw material costs, labour, R&D costs and inventory budget. This budget will help the INWIDO company to determine the total cost of the production process so that they can utilise the budget effectively.

Cash budget: It is the expected projection of the amount of cash in the organisation. It includes the cash inflows and outflows of the company such as revenues, loans, expenses paid or received etc. It provides the cash flows of various transactions and processes. Through this budget, INWIDO company can effectively determine the current cash position of the company to understand whether their cash flows are in control or not. If the cash flows are not under control, then management should take appropriate measures to control them.

Financial Budget: It is the expected incomes and outflows in an organisation for the long as well as the short term. It is helpful in providing the financial statistics and position of the company in the market. It is useful for INWIDO company to manage their finances of various operations for performing their business operations efficiently (Nielsen, Mitchell and Nørreklit, 2015).

Management accounting system to respond to financial problems.

Organisations need to manage the cash flows of the company which helps to maintain a regular flow of cash. Because of this manager have proper awareness about their liquidity. It provides accurate information regarding their flow of cash. With the help of this report, management can take decision according to it. The manager builds strategies which are required in the organisation for the identification of their resources. Organisations have to maintain enough amount which is helpful to pay their obligations. There are some useful techniques which help the company to maintain their performance.

Key performance indicators (KPI): - It is a business matrix which is used by corporates or managers of the organisations. It analyses those factors which one beneficial for the company. Key performance indicates a focus on those functions which provide highly relevant information to the organisation. KPI helps in determining companies' strategies regarding goals and performances. There are two types of indicators in the KPI: a financial indicator and second one is a non-financial indicator (Leitner, 2013).

Benchmarking: - Benchmarking is the process which compares their products and services with other companies' products who is best in the same industry line. Benchmarking is that point which determines the opportunities for improvement. In benchmarking, there are two ways of improving opportunities first one is continuous and the second one is dramatic.  Continuous is like increment and dramatic improvement means re-engineering the whole internal process. In the benchmarking technique, organisation compare their performances on the basis of actual performance and standard performance. This technique provides accurate differences with the exact reason, which helps in the future to make decisions.  

Financial governance: -   Some important rules and regulations made by the government which help the organisation to solve their financial problems.  These rules are followed by all companies which help in maintaining financial issues.

Benefits of effective management accounting system:

There are a number of additional benefits to a company like INWIDO to implement the concept of an accounting system such as reducing the work pressure and supporting running the business in more appropriate manner. Some of the basic benefits are:

Performance: With the proper use of an Inventory management system multinational companies like INWIDO are helpful in reducing the gaps due to which the cost of production is raised. This helps them to sell products at decent prices helping to increase profit and improving the overall performance of operation.

Growth: - All the system of management plays an important role in making the company grow and develop in this competitive environment. INWIDO is one of the leading companies in the UK market, therefore managers used to calculate net profit for years with the help of marginal costing techniques in order to determine the growth during a time period. With the help of Account receivables report managers are able to raise funds in the company and distribute the same to make operations effective.

CONCLUSION

In conclusion, it has been observed that management accounting also known as cost accounting helps in analysing significant costs of business operations that further support to form of financial reports, records and accounts. Assorted types of planning tools are useful in solving financial issues such as managing cash flows, effective planning etc. There are different types of accounting tools that are used in solving the financial problems faced by companies.

REFERENCES

• Lavia López, O. and Hiebl, M. R., 2014. Management accounting in small and medium-sized enterprises: current knowledge and avenues for further research. Journal of Management Accounting Research. 27(1). pp.81-119
• Leitner, S., 2013. Information Quality and Management Accounting: A Simulation Analysis of Biases in Costing Systems (Vol. 664). Springer Science & Business Media.
• Modell, S., 2014. The societal relevance of management accounting: an introduction to the special issue. Accounting and Business Research. 44(2). pp.83-103.
• Nielsen, L. B., Mitchell, F. and Nørreklit, H., 2015, March. Management accounting and decision making: Two case studies of outsourcing. In Accounting Forum (Vol. 39, No. 1. pp. 64-82). Elsevier.
• Senftlechner, D. and Hiebl, M. R., 2015. Management accounting and management control in family businesses: past accomplishments and future opportunities. Journal of Accounting & Organizational Change. 11(4). pp.573-606.
• Soin, K. and Collier, P., 2013. Risk and risk management in management accounting and control.
• Ward, K., 2012. Strategic management accounting. Routledge.
• Wickramasinghe, D. and Alawattage, C., 2012. Management accounting change: approaches and perspectives. Routledge.

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