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ACA Travel Agency is a small size travel agency, that has a been in business since 2009. It currently employs 2 travel consultant staff and one manager based in the CBD. The main destination of the clientele that visit the agency is South East Asia. This is because your reputation of quality service, good competitive pricing and skilled and knowledgeable agents. Customers are from many nationalities and some of the South East Asian tours that you offer have been very profitable over recent times due to the increase in the commission rate from the suppliers.

The Owners have recently created a position for a financial officer and you have been contracted to review the following and outline why all travel and tourism businesses need to draw up and monitor budgets.

A detailed review of the ACA Travel Agency Business plan prior to commencement is recommended.

Sections of the business plan can be used throughout this assessment and you may refer to its details for your task completion.

The owners have asked for you to complete the tasks, using the background knowledge of the Business Plan and information you will research and apply.

As the Financial Officer, write a report of 700- 1000 words which you will submit to the owners.

  • Outline and give a detailed description of three (3) types of budgets that might be utilised by ACA Travel Agency and why are they needed by the management and other stakeholders. 
  • Describe the sources of information that could be utilised to inform these three (3) types of budgets – Give a working example of how both internal and external methods of communication could be used at ACA Travel and how the sources of information have changed over time with technology.
  • Discuss in detail how different stakeholder personnel inside ACA Travel agency may be able to contribute to a Master budget (All departmental budgets combined) of ACA Travel along with the other types of budgets
  • The manager of ACA travel, has also asked you to make recommendations of the appropriate budgeting processes. Describe these budgeting processes for the manager and what impacts they will have on the profitability of the agency. How could the correct budgeting method decision be beneficial to the stakeholders?
  • As a member of the ACA Travel Agency team, (as outlined in the Organisational chart) you are required to discuss the benefits and the shortcomings of a draft budget with suitable stakeholders.
  1. With whom might a draft Master budget be discussed,
  2. What method could this discussion take place and how could this assist in meeting the budgetary requirements?
  • Once the departmental and master budget is finalised with the above stakeholders, to outline whom should the finalised budget be communicated and why is it important to ensure that the communication and monitoring is ongoing.
  • Discuss how often individual departmental budgets need to be reviewed, along with the Master budget when looking at ACA Travel Agency.

  • What actions could you take in the agency if the budget is not achieving the intended objectives

Types of Budgets for ACA Travel Agency

ACA travel agency may use Master budget because it will help the management and the stakeholders of the organization to get an overview of the company’s sales, assets, operating expenses and many more.

The second form of budget which can be used by the company is Operating budget. Operating budget will help the management department of the ACA Travel agency to check the reports of the organization monthly or weekly and they can also whether any overspending is done or not (Griffin, 2013).

The last type of budget which can be used by the agency is the Financial budget. The financial budget of the organization will help the management and the stakeholders of the company to have an overview of the financial health of the company. It will help the managers to understand the revenues and the expenses that are being incurred by the company.

A company like Apple releases its Annual report quarterly. It creates its budget following the rule of Operational budget. This means that the company is using Operational budget technique to create a budget (Apple, 2017). Other sources of Information have been retrieved from various books and journals which has been mentioned in the reference list.

The internal mode of communication which can be used by the company ACA Travel Agency is through electronic techniques or through printed media like journals. The company can also share the budget to its stakeholders through verbal communication.

The annual report of the company can be posted in the company’s website so that all the stakeholders and customers can get access to the budget of the company. This method of communication is known as the External method of communication.

It is very important to engage the stakeholders of a company in making budget decisions. While creating a master budget plan for the company the stakeholders can contribute in a large way. The stakeholders of a company have a knowledge on the customer’s expectations. While formulating the budget an expenditure for better services of the agency like experienced tour guides, hotels etc. should be estimated.

Budgeting means planning and coordinating the expenses of the organization while carrying out various activities. The budgeting process that should be followed by the management department of any organization should have 4 steps. The steps are Objectives, Strategies, Measures and Targets (Hansen, 2011).

While creating a budget first the management department should set up an objective. The objective should be based on how much the company wants to spend on per customer. The next step which has to be followed by the management is developing strategies. According to Schäffer (2013), development of strategies or action planning involve increase in the offering of the products to the customers, a budget should also be made for the promotional and marketing strategies of the organization.

Role of Budgeting Process

Budgets should be made on weekly or monthly basis. The top level management authorities of the organization should weekly or monthly evaluate that whether the company is successful in receiving the targets that has been set or not. The last step of the budgeting process which should be followed by the company is setting up of targets which is quantifiable and time based. The targets should be mainly on the basis of the sales or the revenue generation of the product.

A correct method of budgeting can help the stakeholders in a lot of way. With efficient budgeting the organization can achieve its goal in a more efficient way. Transparent budgeting may help the stakeholders of the organization that how much profit would be made in the end of the current financial year. An efficient budgeting system also helps to achieve the sales target of the organization more efficiently and thus it helps the organization to generate more profit which in turn helps the stakeholders of the organization.

A draft budget is that type of budget which is in the stage of working. One of the important benefit of draft budget is the organization can change the budget according to its need. Though it has few benefits but the most important of shortcoming of a draft budget is too much changes in the formulation of the budget may create confusion and it can reduce the efficiency of the budget (Eldenburg, 2016). According to the organization chart mentioned a draft budget can be discussed with the owner of the business.

Collaborative method of discussions should take place among the budget formulator and the owner of the business. According to this method idea can be exchanged between them and if any changes required it can be done accordingly.

Once the budget is finalized the budget should be communicated with all the employee of the organizations. Since, budget helps to identify the goals of the company it is very important to communicate the budget with the employees of the organization because then it would be easier for them to achieve the goal.

Individual departmental budget like Administration, Inventory and many others should be looked after very keenly. The budget made for the administration department should be looked after on a monthly basis, the purchases of any equipment should be done according to the need.

The master budget should be evaluated by the top management authorities and it should be seen whether the targets are being achieved or not. Budgets should be monitored and employee should be motivated to achieve it (Eldenburg, et al., 2016).

The budgets should be reviewed on monthly basis. It should be seen whether the organization is achieving its target on monthly basis or not. Regularity in evaluation reduces the occurrence of any discrepancies.

Action Description

Department responsible

Resources required

Outcome

Re formulation of the budget if the previous one is not effective enough

Finance department and the top level management department is responsible

Skilled employees, analytics should be hired so that they can predict a proper estimation.

Reformulated budget is the outcome which will be more effective for the organization.

Awareness on the newly formed budget

Deputy ministers and senior management

Meetings should be conducted where the awareness of the newly formed budget should be discussed.

The benefits and the requirements of the budget are discussed among the employees.

 

References

Apple, 2017. Annual report. [pdf]. Available at  <https://www.annualreports.com/HostedData/AnnualReports/PDF/NASDAQ_AAPL_2017.pdf >  

Eldenburg, L.G., Wolcott, S.K., Chen, L.H. and Cook, G., 2016. Cost management: Measuring, monitoring, and motivating performance. 4th ed. New York: Wiley Global Education.

Griffin, R.W., 2013. Fundamentals of management. 5th ed. New York: Cengage Learning.

Hansen, S.C., 2011. A theoretical analysis of the impact of adopting rolling budgets, activity-based budgeting and beyond budgeting. European Accounting Review, 20(2), pp.289-319.

Schäffer, U. ed., 2013. Budgetierung im Umbruch? 7th ed. London: Springer-Verlag.

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My Assignment Help. Importance Of Budgeting In Travel And Tourism Business - ACA Travel Agency Essay. [Internet]. My Assignment Help. 2020 [cited 14 July 2024]. Available from: https://myassignmenthelp.com/free-samples/sit50116-diploma-of-travel-and-tourism-management.

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