rewriting work -- financial plan

There are a lot of potential benefits of using the cash budgeting system for the business. Cash budgeting helps determine whether the cash balances remain sufficient to fulfill the businesses regular obligations. Also, it tells the business whether it’s minimum liquidity’s and cash balances meet the requirements that are stipulated by the bank or an internal company. Cash budgeting is also a great tool to determine if too much cash is being retained, which could be used in other productive activities. When using cash budgeting the main goal is to only retain the required minimum working capital. The potential disadvantage of using the cash budgeting system is that the cash flow doesn’t equate to the business gaining/making a profit. Reducing cashflow may help the business have much larger profit in the long run and will cover more than just the interest associated with the business securing short-term loans and the banks immediate obligations.

The budget supports the strategic goal of the business to increase the businesses revenue by 10 percent annually by increasing their marketing. By increasing marketing, it will boost sales because we all know that quantity doesn’t necessarily mean quality, so careful planning, test-marketing and monitoring your results maximizes your sales. Changing your product or service pricing is another way to increase your businesses revenue because if your product or service is price sensitive look at what your competition is charging and adjust your prices higher or lower based on what goals your business has set. My expected business expenses are:

1. Marketing will cost $1,500. This will pay for flyers, a social media campaign, business cards, and merchandise (shirts, keychains, hoodies, etc.)

2. Labor will cost $5,500. This will cover the recording booth, work stations, furniture, and painting of the studio.

3. Operations will cost $7,500 a month. This will cover the rent, employees pay, electric bill, and water bill.

4. Insurance will cost $4,500 a month. This will cover the insurance of the studio equipment (headphones, microphone, recording booth), computer, television, speakers, furniture.

5. My sources of revenue are my sales of products and services. We have services that include studio time, mixing, mastering, production, directing.

I will adjust my small businesses cash budget to manage such contingencies as emergencies and market shifts by setting up an additional bank account where every month a certain amount gets put away. This allows me to have a backup fund available at all times. Adjusting the cash budget for product and distribution shifts will be done by comparing how we can have the top-quality merchandise at a lower cost meaning buying more at a whole seller’s price. A cash budget shows how much cash a company needs to enable their normal operation. Where an operation budget shows the overall inventory including cash, assets, etc. that is needed in order for the business to operate smoothly. Cash budgeting is beneficial to a business because it allows the business to have cash on hand at the beginning of their budget period and the estimated cash flows and outflows. The importance of the cash budget lies in its ability to identify a company’s future financing needs, highlight the need for corrective actions and evaluate a company’s performance. Operating budgets are important because it helps manage their current expenses, project future expenses, building reserves, and the most important thing is an operating budget shows the businesses accountability.

Budget variance is crucial for the operation of a business because it includes the changes in sales, changes in material cost or changes in the labor costs. Budget variances are sometimes favorable, this happens when the costs are lower or the revenue cost is higher. At the same time, it can be unfavorable if the costs are higher and the revenue cost is lower. Businesses use a budget variance when their sales are lower than their monthly budget. I found out that cash budgeting is the easier way to operate your business because it allows the business to have cash on hand. For my business, it will be easier to operate because everything we need is easier to access with cash on hand. A operating budget will be good when I expand my business to different locations.