Case Study
April 8, 2013
Case: Chester & Wayne
Budgeting in a business is important for so many reasons. Business leaders often deal with large amounts of money, and some employees or outsiders might see the organization's revenue as nearly limitless. Regardless of the business cash on hand, though, careful budgeting plays a critical role in any organization's success. Chester & Wayne is a large regional food distribution company and the CEO of the company has asked for some assistance in preparing a budget for their cash flow. With the information provided by CEO, Mr. Wayne, the budget will be carefully planned. “By having a firm plan in place you can easily see, over the year, in which months you are making a profit and you can track this against each individual month to see how your business actually performed in relation to your budget. When you are able to see what you planned and what actually happened, you will then be able to easily identify any differences – where they occurred, why they happened and how you can adjust your budget or spending to get on track” (Loubser, 2011). First, a cash budget for each month of the fourth quarter and for the quarter in total will be prepared.
| | | Quartley Budget | | | | | | | Chester and Wayne | | | | | | | | | | | | | | | | 9/30/2012 | | | | | | | | | | | | | | | Month | Budgeted | | | | | | | | | | | | | | | August | 750,000 | | | | | | | Sept | 787,500 | | | | | | | Oct | 826,800 | | | | | | | Nov | 868,200 | | | | | | | Dec | 911,600 | | | | | | | Jan | 930,000 | | | | | | | | | | | | | | | August | Sept | Oct | Nov | Dec | Jan | Cash | 142,100 | | | | | | | Marketable Sec | 200,000 | | | | | | | Accounts Rec | 1,012,500 | | | | | | | Inventories | 150,388 | | | | | | | Accounts Payable | 354,155 | | | | | | | Other payables | 53,200 |
Case: Chester & Wayne
Budgeting in a business is important for so many reasons. Business leaders often deal with large amounts of money, and some employees or outsiders might see the organization's revenue as nearly limitless. Regardless of the business cash on hand, though, careful budgeting plays a critical role in any organization's success. Chester & Wayne is a large regional food distribution company and the CEO of the company has asked for some assistance in preparing a budget for their cash flow. With the information provided by CEO, Mr. Wayne, the budget will be carefully planned. “By having a firm plan in place you can easily see, over the year, in which months you are making a profit and you can track this against each individual month to see how your business actually performed in relation to your budget. When you are able to see what you planned and what actually happened, you will then be able to easily identify any differences – where they occurred, why they happened and how you can adjust your budget or spending to get on track” (Loubser, 2011). First, a cash budget for each month of the fourth quarter and for the quarter in total will be prepared.
| | | Quartley Budget | | | | | | | Chester and Wayne | | | | | | | | | | | | | | | | 9/30/2012 | | | | | | | | | | | | | | | Month | Budgeted | | | | | | | | | | | | | | | August | 750,000 | | | | | | | Sept | 787,500 | | | | | | | Oct | 826,800 | | | | | | | Nov | 868,200 | | | | | | | Dec | 911,600 | | | | | | | Jan | 930,000 | | | | | | | | | | | | | | | August | Sept | Oct | Nov | Dec | Jan | Cash | 142,100 | | | | | | | Marketable Sec | 200,000 | | | | | | | Accounts Rec | 1,012,500 | | | | | | | Inventories | 150,388 | | | | | | | Accounts Payable | 354,155 | | | | | | | Other payables | 53,200 |
References: Loubser, T. (2011, November 7). Retrieved April 7, 2013, from Why budgets in business are a must have: http://www.efinancialmanagement.com.au/accounting/why-budgets-in-business-are-a-must-have/ Marineau, M. (2011, April 12). KVAL.com. Retrieved from OSU study: 'Stock-outs ' bad for e-commerce: http://www.kval.com/news/business/119732304.html Schneider, A. (2012). Managerial Accounting: Decision Making for the Service and Manufacturing Sectors. San Diego: Bridgepoint Education, Inc.