Budget Review And Forecasting: Key Stakeholders, Strategies And KPIs

Key Stakeholders Involved in Budget Review

The Black Helmet Motor Cycle Company wholesales Motor Cycles. They have two models available being the Roadster and the Trailer. They have offices in each state of Australia and a Management team including representatives from Sales, Marketing, Purchasing, Warehousing, Human Resources, IT, Administration and Finance Divisions.

In October 20x3 the Finance Group commenced their budget compilation activities relating to 20x4. The following information relating to Sales Revenue for 20x3 has been produced by the Hot Motor Cycles Research Agency.
Extract from the Report from the Hot Motor Cycles Research Agency

1.Forecast Information for 20x3
a.The forecast of Total Sales for the Australian Market in 20x3 is as follows:
b.On Road Bike (similar to the Roadster) - 20,000 cycles
c.Off Road Bike (similar to the Trailer) - 30,000 cycles
d.The Market Share of the Roadster & Trailer is expected to remain at 10% and 15% respectively.
e.The Average Wholesale Price of the Roadster & Trailer Bikes is $5,000 & $3,500 respectively.
f.Whilst 20x3 has not ended it is expected that sales for both products will be as follows - 20% of Black Helmet’s total sales achieved in the first Quarter ended 31 March 20x3, 30% in the next Quarter ended 30 June 20x3, 30% in the Quarter ended 31 September 20x3 followed by 20% for December 20x3.

2.Budget assumptions – 20x4

The Market Research Agency has provided the following information to assist in preparing the budget for 20x4-
a.Economic data and analysis suggests the Total Australian Market for 20x4 is expected to increase in volume for the On Road Bikes by 10% compared to 20x3. The Market for the Off Road Bike is expected to be stable.

b.Black Helmet’s share of the On Road segment is expecting to remain stable at 10% whilst a strong market share for the Off Road bike is expected due to product enhancements with a lift to 20% of the total expected market in volume.

c.The above volumes will be achieved with prices of $5,200 for the Roadster and $3,700 for the Trailer.

d.It is anticipated that Quarterly sales revenue for both products will fluctuate from the current year. For the first quarter of 20x4 sales volume is expected to be 15% of total sales for calendar year 2014. 20% of sales are expected to be derived in the second quarter ending 30 June 20x4. An improvement to the company’s products should see a market reaction where the September quarter should be 35% of total sales followed by 30% of the total for the last Quarter being period ending 31 December 20x4.

Cost-Saving Strategies for Effective Budget Control

1.As the Sales Manager you are required to prepare a brief report to senior management. This report should outline the assumptions made and expected outcomes relating to the 20X4 budget as compared to the same period in 20X3. They have specifically asked you to comment on the key factors you have considered in creating the Sales Revenue Budget and provide a brief explanation of each one. (Refer to factors in question and comparative summary – 1 or 2 paragraphs only

2.Who are the major internal and external stakeholders you have considered in preparing the budget? What interest do they have in the development of the budgets for the company?

3.“The Development of Budgets will often involve the collaboration of team members and negotiating with management and other stakeholders”.   As Sales Manager what approach would you take to developing the budget with your team?  What are the critical factors to consider when undertaking this process?   Use your WORD (or similar) document

The General Manager of the JH Shoe Company, Tina Brown has received a number of reports from the accountant relating to their financial performance for the first eight months of the 20x4 Financial Year.

The First Report outlines the Sales Units and Revenue for the 3 products sold by the company. This report shows the Actual Year to Date Performance versus Budget and the Full Year Budget.

Tina is concerned with the trend in Sales Revenue overall. She has therefore met with you as the Sales Manager to discuss the performance to date.
From the discussions held and the information provided she has asked for an explanation of a number of items relating to the performance. The following is a Revenue Comparative Report for the eight month period ended February 20x4.

After your discussions with the General Manager you have decided to hold a meeting with your team to discuss the results for the eight month period. You released an agenda for the meeting outlining in clear and concise terms the requirements to be discussed. This includes specific details for each product such as Volume, Price per unit and/or the mixture of sales between products which have differing prices. These factors have had an impact on the year to date result and need to be discussed. Whilst you have knowledge of departmental activities and results for each month, you would like each manager to report on the key activities driving sales and how controllable and successful they were. You have also had concerns about the timing of the static budget and question whether it is accurate based on the assumptions made 9 months prior. There are 4 key points or requirements that you would like to cover at the meeting:

1.From the ‘Revenue Comparative Statement’ you will prepare a written report for your team summarising the results. This will include deviations in the variables outlined in the report which have contributed to the unfavorable year to date variance of $980,000.

2.Determine the key points or questions to raise in order to gain an understanding of the current performance vs budget and future action?

3.Having received an understanding of the variances and relevant points, explain to the group the concept of forecasting and why forecasting for the full 12 month period is important? What impact may competitor behaviour, economic data, advertising expenditure and seasonal factors have in developing the forecast for the remaining 4 months.

4.How will you communicate, support, monitor and motivate staff towards achieving your countermeasure actions or achieving a revised KPI.
Use your WORD (or similar) document.
 

Key Stakeholders Involved in Budget Review

1As compared to the budget for the year 20x4, the relevant assumptions taken by the company are outlined below.

The budget has been increase by the 1700 units or 26.2%.

Due to the introduction of the trailer model, the sales have been improved comparatively; better and the competitive pricing strategy have been adopted.

The total Australian Market’s moderate growth went up in the year 20X4 and expects the growth achievement with the more paces.

The market trailer increased the revenue by 20%.

There is an increase in overall volume through growth in the Australian Market, yet there is an increase in the price by 4%.

2.Internal stakeholders: the managers and the relevant staff of the department between the organisations. These are the major users of the budget and therefore they rely on the budgets. Also they use the budget and decide in the future objectives and the goals that need to be achieved.
 

External stakeholders: the external stakeholders on the other hand are the suppliers, clients, customers, other key individuals, who are interested by the budgets. These are those classes of people who either provide the products or services or use the same from the company.

3.The current charge out rate and the proposed rate have a difference of 21% and therefore the management shall devise the potential strategies as mentioned below to keep a control on the costs. The charge out rate after the calculation is $160, this is due to the increase in the productive hours. The team shall focus on reducing the commission in the investment department. To review the budget the opportunities that are available for the management are basically to decide the route map through which the company wants to reach in future.

The development of the budget shall be a key element for the organization as it helps in answering the questions like what will be the projected sales, will the margins improve for the company, is the additional capital required or not. Factors that shall be considered while reviewing the budget are presented below

• The consultation from each and every department is necessary. For example sales team will suggest the realistic projections of revenue and the manufacturing team can advise on the cost of the delivery. The sales figure shall be $4032772 but to achieve the breakeven point DS Financial services group shall maintain the units of sales at 25109 units.
• The estimation of the revenues on the basis of the recent growth shall be considered since the sales have a wide impact on the influence of the cost.
• The sources of the revenue are again the critical factor that will help in analysing whether the company have made use of the proper resources and a hybrid mixture of the revenue streams. DS financial services must stabilise the expenses for the investment and financial planning sector
• A regular revision needs to be done due to unforeseen circumstances for the operating and the non-operating expenses. The commission in the investment sector is high at $60000 and the employee’s expenses are comparatively higher in investment sector than information technology.
• To review the budget the external factors such as the economic up-down or the political factors shall also be considered. 

1.The summary of the results is such that gross profit increased by -3.73%, whereas the expenses are less than the budgeted ones. Further the current ratio is less than the budgeted ones ass the current liabilities are more. Moreover the return on investment is also less as compared to the budgeted scenario.

2.The key points to rise are enhancement in the production, inventory turnover ratio and the management of the stock and the efficiency of the company.

3.The method of the forecasting is to cleverly determine the future outcomes which are based on the past events, management insight and also helps in analysing the performance of the company in the market. The forecasting of the 12 months are done to understand the analysis of the fact that whether the trend will continue or not.

4.The KPI needs revision because to communicate the managers effectively and monitor the performance the revision is necessary. The major duties of the staff shall be to understand the key measures and how they are calculated and what positively can be done in order to bring positivity in the organisation. Apart from the other key performance measures are inclusive of the motivation, support, powerful team goals objectives and the vision having he staff employed to build a better future.