Inadequate Budgeting Process And Its Impact On Retail Store Performance

The relevance of budget preparation using adequate information from departmental managers

The current budgeting process that is being used by Lisa Lin is not adequate, which is negatively affecting the overall performance of retail store. In addition, the style of budgeting is relevantly not accurate, where Lisa is not using adequate information from departmental managers and preparing the overall budget. The lack of cooperate conditions of Lisa is relevantly forcing the retail store to attain unfavourable budget results, where significant variances are conducted and hamper the departmental managers to support the designed budget. Brown-Liburd, Issa and Lombardi (2015) mentioned that budget preparation is mainly conducted with the help of adequate knowledge from the target departments, as it supports the budget process and management to improve their productivity. Lisa relevantly does not share the requirements of the budget, as she believes that her longest service is enough for drafting the adequate level of budgets for the retail store. Furthermore, Lisa did not consult the manager regarding the operational plans, which directly have negative impact on performance of the retail store.

The budget is negatively affecting the overall business performance, as it is not being prepared accordingly. The departmental condition has indicated that the decline in performance is mainly due to the high turnover of employees conducted in all departments of the business. In addition, the budget used by Lisa is not adequate, which is negatively affecting the overall operational capability of the business. The budget process used by Lisa is relatively not being affective, as higher variance is occurring on yearly basis. The high variance that is detected from the overall evaluation is due to the incorrect actions that have been taken by the budget controller. The budget controller is directly preparing the budget in accordance with her and does not consult any managerial suggestion. This is the main reason behind the high variance, which is being incurred by the retail organization. Furthermore, the departments are lacking performance against the budget, which has been highlighted by various departmental managers. Butler and Ghosh (2015) mentioned that wrong budget preparation directly hampers the operational capability of the organization, as it does not allow the productivity to run 100%.

There are significant implications that can incur when an organization does not properly conduct their budget. The relevant implications are depicted as follows.

The wrong budget preparation directly hampers capability of the organization to effectively price their process. The overall costing that is incurred by the retail shop is relatively not evaluated by the company, as the budget process is incorrect. This is the main reason behind with the overall variance is that is increasing in the retail shop, as the managers are not able to cope up with high-end budget values.

The negative impact of wrong budgetary process on overall business performance

With the wrong budgetary process, the organization will relatively have poor cash flow, as the budget controller is not able to understand the level of activities that is needed to supported operational process of the retail business. Therefore, with the overall problematic conditions of the organization the management will not able to understand the stagnation in their cash flow.

Furthermore, with wrong budgetary process the budget controller will not be able to track the credit conditions of the details, which plays a significant role in the sector. The wrong budgetary process is relatively hampering capability of the managers to make sound decisions regarding the overall supply of the product, as they are not able to detect their credit conditions. Collier (2015) indicated that management without the proper knowledge of budget preparation process is negatively hampering profitability and raises the total cost of operations.

Questions	Explanation
What are the relevant facts	The company has been struggling to survive in the competitive market, where the excessive competition is generated from oversea low cost of production. The company is not able to continue with their profits due to the intense price competition, which is hampering their capability to continue a profitability position. On the contrary, the shift from the current operations will directly have negative economic impact on local community, while the non-shifting measures might result in company closure. Hence, there is significant dilemma for the company, as they need to take actions on economy to sustainable growth.
Which of the values make these facts significant	The significant fact that can be determined from the overall case is integrity, social commitment, trust, and reliability.
What assumptions am I making	The major assumption that is been made is that the company is in the brink of failure if operations are not shifted, while the community full relies of the business, while not providing any costing cutting scope to the organisation. The other assumption is the problematic condition of the organisation, as they are not able to minimise the expenses, while maintaining the factory in the current local community.
What are the weaknesses in my own position	The major weakness is detected from different segments, as the company is not able to understand the measure that needs to be taken for reducing the overall expenses of production. The company is also not able to find other avenues of cost savings, while it also indicates that the company does not have to make so much profit. The local community in which the company is operating can be asked for help to reduce the high cost incurred from operations.
Would I be happy for my actions to be open to public scrutiny	The shift in operations from the local community to internal production house might be open to scrutiny, where it might have negative impact on the community regarding the decision process of the organisation.
Would I be happy of my family knew what I’d done	Yes, there will be happiness for the family, if there are no other alternative for transferring the production system offshore, as the decision as a necessary one. This decision will not only save the company but also allow the management to retain administrative level jobs in the community, whereas the continued high cost would have forced the organisation to shut down.
What will doing this do to my character or the characters of my organisation	The organisational character will be in question, as thy will be shifting their current operations and closing the factory. This may lead to backlash of products, as the community will deem the organisation bad for cutting the overall jobs.
What would happen if everybody took this course of action	If everyone takes, the same course of action then there will be no industry left for the community, which will raise the level of concern, manufacturing jobs will decline immensely. This will negatively impact the economy and raise unemployment in the country
Have I really thought through the issue	Yes, the issues have been thought thoroughly, while the decision is made on the basis of the results obtained from the analysis
Have I considered the possibility that the ends may not justify the means	The shift in the current operations from the community to the offshore may result in job loss, as the organisation needs to improve their competitiveness. Moreover, if the operations of the organisation continue then then the competition will negatively affect the business and force them to go bankrupt. This will directly result in job loss of the community.

Particulars	Value
Coaching session fee	$600
Cost of tennis racket and gear per session for Nicholas	$180
Cost for tennis balls (per session)	$70
Additional tennis court	$14,000

Particulars	Value
Fixed cost	$14,000
Sales	$600
Variable cost	$250
Contribution margin (number of sessions)	40

The above table indicates that overall 40 sessions are required for Nicholas to breakeven the overall tennis court expense.

Particulars	Value
Coaching session fee	$600
Cost of tennis racket and gear per session for Nicholas	$180
Cost for tennis balls (per session)	$70
Additional tennis court	$14,000

Volume	35	40	45	50	55	60	65	70	75	80	85
Particulars	Value	Value	Value	Value	Value	Value	Value	Value	Value	Value	Value
Coaching session fee	$     21,000	$ 24,000	$        27,000	$ 30,000	$ 33,000	$ 36,000	$ 39,000	$ 42,000	$ 45,000	$ 48,000	$ 51,000
Cost of tennis racket and gear per session for Nicholas	$       6,300	$   7,200	$          8,100	$   9,000	$   9,900	$ 10,800	$ 11,700	$ 12,600	$ 13,500	$ 14,400	$ 15,300
Cost for tennis balls (per session)	$       2,450	$   2,800	$          3,150	$   3,500	$   3,850	$   4,200	$   4,550	$   4,900	$   5,250	$   5,600	$   5,950
Contribution profit	$     12,250	$ 14,000	$        15,750	$ 17,500	$ 19,250	$ 21,000	$ 22,750	$ 24,500	$ 26,250	$ 28,000	$ 29,750
Additional tennis court	$     14,000	$ 14,000	$        14,000	$ 14,000	$ 14,000	$ 14,000	$ 14,000	$ 14,000	$ 14,000	$ 14,000	$ 14,000
Total Profit	$      -1,750	$        –	$          1,750	$   3,500	$   5,250	$   7,000	$   8,750	$ 10,500	$ 12,250	$ 14,000	$ 15,750

 The above graph relevantly depicts the overall cost-volume-profit condition of overall proposal, which can help in understanding the breakeven point.

Particulars	Value
Coaching session fee	$600
Cost of tennis racket and gear per session for Nicholas	$180
Cost for tennis balls (per session)	$70
Additional tennis court	$14,000

Particulars	Value
Coaching session fee	$      30,000
Cost of tennis racket and gear per session for Nicholas	$        9,000
Cost for tennis balls (per session)	$        3,500
Contribution profit	$      17,500
Additional tennis court	$      14,000
Total Profit	$        3,500

Particulars	Value
Coaching session fee	$600
Cost of tennis racket and gear per session for Nicholas	$180
Cost for tennis balls (per session)	$70
Additional tennis court	$14,000

Particulars	Value
Coaching session fee	$ 30,000
Cost of tennis racket and gear per session for Nicholas	$   9,000
Match Players	$   4,000
Contribution profit	$ 17,000
Additional tennis court	$ 13,500
Total Profit	$   3,500

 

From the overall evaluation, it can be detected that the relevant negations can be conducted for tennis court for $13,500, which can be detected from the above table.

The qualitative factor are relevantly needed for addressing the financial performance of operations, which can ensure profits for Nicolas. The qualitative factors that Nicolas should consider are conducted as following.

Customers: The impact of the overall customer need to be considered by Nikolas, as he has only one customer for the overall session. Therefore, the qualitative factor needs to be understood by Nicolas, the overall income will be generated from one individual.

Renting: The overall renting process is needed by Nicolas for comparing the overall project, as the costing of rent will determine the profits generated from the operations.

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