Assignment 2: Budget Planning and Control
Assignment 2: Budget Planning and Control
Wal-Mart is an American retail company that has a chain of discount-department stores, grocery stores and hypermarkets and it is headquartered in Bentonville. Wal-Mart has more than 1,100 stores and clubs in 28 countries that help the company in expanding its operation in other cities. It is the world’ largest corporation by revenues and has stores in US and Canada under the name of Wal-Mart. The company has high market share in the US market and more than 2.2 million employees who are working for Wal-Mart all around the world.
Reasons for Preparing Budget
Wal-Mart should manage budget for the following reasons.
Positive Outcomes
If Wal-Mart properly performs effective budgeting then the financial outcomes are.
Direct and direct costs will become low
Effective control on the unnecessary expenditures and revenue can be increased
Negative Outcomes
If Wal-Mart improperly performs effective budgeting then the financial outcomes are.
Costs and expenses of the specific period will show high value.
Revenues will not be generated according to expectations.
Details
The high-level budget plan provided for Wal-Mart is simple that requires purchasing of new stores in the United States. The plan is categorized in four phases according to the steps from the initiation and ending of the budget plan. The preparation is the first phase that determines all the efforts of the management and time required. The preparation also includes material, labor, and other costs and expenses that are expected to incur during the execution of the project. The approval is essential to be given by upper management for executing the budget. The evaluation and assessment of the budget components are necessary to identify if everything is moving in a right direction or not (Zhang, 2015).
Techniques for Managing Budget
There are two techniques that Wal-Mart should practice to maintain its budget.
Forecasting
It is true that budget may not perform according to the expectations due to the inclusion or exclusion of some constraints during execution. It is necessary to forecast the budget regularly and assess that all the things are going in a designed direction, or there is a need to change the direction. Forecasting should be done without delay as it is easy to control the small changes at once rather than ignoring to reach for a big change in the budget (Westland, 2011).
Informing
The crucial thing is to inform the project team members that the budget is forecasted, and the changes are made. Well-informed members can also set their direction for the execution of the specific project. If the information is not transferred to them, there will be a sort of mismanagement in the overall plan. It will result negatively in the outcomes of the prepared budget. On the other hand, regular information for the changes will allow them to align their strategies according to the amendments (Westland, 2011).
Action Plan
There are few steps that need to resolve the budget misalignment.
Listing the components of budgets that are going above estimations.
Check whether the estimation is based on the market research.
Take estimations from different suppliers who are currently sitting in the market.
New estimations should be mentioned in the changed budget report.
The approval is needed for the execution of new budget plan.
The budget plan should be forecasted regularly for the amendments.
The budget plan should be assessed regularly to remove any discrepancies.
Technique for Resolving Actual Discrepancies
The variation concept is used in budgeting to resolve the discrepancies and provided an effective plan for execution. It referred to estimate the amount based on research but provided the option of 5-10 percent of increase or decrease in the prepared budget as compared to the actual amount. It is used to remove the chances of increase or decrease in the actual budget as compared to the estimations that can cause difficulties for the budget preparers . There should be a leverage option of 5-10 percent to avoid any difficulties due to the change in actual budget amount in future. The changes may come due to inflation and other factors that can cause a huge threat to the high-level budget plan. It is necessary to analyze the concept and include this in the budget plan. However, the problem needs to be solved in the first instance by forecasting and estimating an effective budget that can be executed efficiently (Vallabhaneni, 2015).
References
Vallabhaneni, S. R. (2015). Wiley CIAexcel Exam Review 2015, Part 3: Internal Audit Knowledge Elements, Part 3. Hoboken: John Wiley and Sons.
Westland, J. (2011, June 23). Project Management: 4 Ways to Manage Your Budget. Retrieved from cio.com: http://www.cio.com/article/2406862/project-management/project-management--4-ways-to-manage-your-budget.html
Zhang, X. (2015). Standards for Enterprise Management Control. New York: Springer.
