Question

Think about your personal budget. How different do you think it is from a company budget? Understanding the different components outlined in a company budget, in addition to the order of completion, helps a business owner, professional, and/or student set reasonable and attainable goals. Budgeting is considered a benchmark document that is pertinent to setting goals and answering questions. Read the following scenario and complete the questions posed below. Scenario Don Flowers, owner of VGTBLS (pronounced Vegetables), has three food trucks that specialize in vegetarian and vegan fast- prepared cuisine. He looks around the conference room as his management team chatting as they settle in for the monthly meeting. "Let's get started," Don said, "we have a lot to cover today, and frankly it's not all good news." The room fell quiet. Don continued, "As you know we recently experienced a cash shortage despite last quarter's record sales. I can't keep going. back to the bank to support operations. I am counting on each of you to figure out a way to keep this from happening in the future." Jasmine Mitchell, the newest truck manager, raised her hand somewhat sheepishly. "Sir, perhaps if we looked at the Master Budget for last month we could begin to identify areas for improvement."

Answer 1

Budgetary control systems are the systems where budgets are established for forthcoming period in advance. This gives an insight into planned expenditure and activity.

Problems that come to notice after going through this conversation are responsibility shifting.

There shall be proper demarcation of responsibilities with each one of them given proper accountability.

Budget shall be there for each one of them and for each activity. While making budget cognisance of other manager's budget control shall be taken. As can be seen from the conversation one of the managers is lacking in manpower so he has to pay extra to get work done from his employees. His manpower budget shall be increased i.e. he shall be allowed to get more employees in the team. But Manager's payment shall be linked to performance meaning after increasing the staff his team's performance shall go up.

One of the manager's complained of getting fake bills i.e. receiving a bill for which material has not actually been received. This is not budgetary part rather this is internal control failure. Bill got approved without even getting relevant materials in the organisation. This needs to be addressed by strengthening internal control over purchases in the organisation.

Truck manager's duty is to look after no downtime and shipments are delivered to customers. He shall have his delivery schedule ready for the coming period and he shall properly co-ordinate and communicate with the department responsible for making supplies available.

Element of surprise i.e. changing the tasks of the managers or making managers to take compulsory leave will also help in improving the situation.

Although, budgetary control is an important aspect here, but in my opinion weak internal control environment is the main cause for downfall of organisation's profit. This problem shall be addressed by proper formation and implementation of internal control policies.