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Overview Of The Budget At Datacompass Cz Accounting Essay

It can be said that the budget process should start of by addressing some basic questions [1]. For example, what are the goals and targets of the budget [2]? Who is going to be the budget officer and what will his/her responsibilities be vis-à-vis the delivery of budget’s targets and for how long i.e. the budget’s time horizon [2]?

In addition, the budget will need to incorporate any limiting factors that may impact on goal realisation [3]. Furthermore, it will be necessary to state what the advantages of budgeting and budgetary control are:

Forces management to contemplate the future and plan for it, using either a SWOT or PEST to identify the ‘background’ for the budget. [4]

Budgeting and control promote coordination and goal realisation [5]

Budgeting and control will provide the company with a mechanism for performance or variance analysis. It is important to acknowledge the budget metaphor as a ‘yardstick’ by which to measure actual performance. Whereas the control element is provided by having a point of comparison between actual and budgeted results [6]. Any digression from the budget can be analysed and identified as controllable or uncontrollable factors.

Budgeting and control will also allow for remedial action to take place in order to correct adverse variances in the future via flexing [7].

Budgeting and control will also improve the allocation of finite resources to achieve the best outcome [8].

Budgeting and control will motivate the budget holder assuming he/she has been instrumental in drawing up the budget, e.g. the bottom-up approach [9].

Budgeting and control will also allow senior management to use their time more effectively to focus on those who are failing to meet their budget targets through a process known as management by exception [10].

Management accounting systems

DataCompass.Cz uses sophisticated customer relations management solutions [11] that have powerful analytical and statistical capabilities to create its initial budget.

The same CRM solution is used to compare and contrast variances [12] and suggest remedial action to be taken, especially if the variances are cumulative [13]. In addition, the CRM solution employed at DataCompass.Cz is also a monthly reporting tool that circulates and collects details of the actual revenue received from each affiliate [*].

Financial appraisal still dominates the evaluation of affiliate performance in the APS Life Science group [14].

To counteract the previous point DataCompass.Cz also employs a balanced scorecard [15] that integrates both financial and non-financial measures into the company’s measurement system.

Possible shortcomings of the balanced scorecard [16].

Customer profitability analysis at DataCompass.Cz [17].

Costing process

DataCompass.Cz also employs ABC to identify ‘cost drivers’ in order to allocate those costs more accurately to DataCompass.Cz’s services [18].

Augmentation to ABC at DataCompass.Cz in the form of benchmarking [19].

Limits of ABC at DataCompass.Cz [20].

The use of service level agreements to negotiate transfer-pricing issues [21].

Capital decision-making at DataCompass.Cz

Capital expenditure on computer hardware every three years i.e. company laptops are replaced every three years. The method used in this decision-making process is the payback method as it is rather simple to employ and is applicable here as it favours short-term projects [22].

The awareness of strategic management accountancy [23] represented by factoring in Moore’s Law [24] into future computer hardware requirements.

Capital acquisition

In case of cash deficiencies, the affiliate will be required to borrow funds to make up the short fall [25]. In this situation, APS Life Science will authorise DataCompass.Cz to take out an inter-divisional loan, subject to the terms and conditions set by the Czech National Bank.

Recommendations (?)

Conclusions (?)

Notes

1.Mango (2005) Introduction to budgeting [Online.] Available from: http://www.mango.org.uk/guide/files/budgeting-v2.doc (Accessed on February 23 2010).

2. Atrill, P. & McLaney, E.(2009) Management accounting for decisions makers.. 6th ed. Harlow, England: Financial Times/Prentice Hall, p.186.

3.Williamson, D. (1999) Budgeting and budgetary control [Online.] Available from: http://business.fortunecity.com/discount/29/budg1.htm (Accessed: 23 January 2010).

4.FAO (n.d.) Budgetary control [Online.] Available from: http://www.fao.org/docrep/W4343E/w4343e05.htm (Accessed: 23 January 2010).

5. Ibid.

6. Ibid.

7. Ibid.

8. Ibid

9. Atrill, P. & McLaney, E. (2009) Management accounting for decisions makers. 6th ed. Harlow, England: Financial Times/Prentice Hall, p.187.

10. Atrill, P. & McLaney, E. (2009) Management accounting for decisions makers. 6th ed. Harlow, England: Financial Times/Prentice Hall, p.184.

11.Anderson, K. & Kerr, C. (2002) Customer relationship management. NY: McGraw-Hall, p.59.

12. Atrill, P. & McLaney, E. (2009) Management accounting for decisions makers. 6th ed. Harlow, England: Financial Times/Prentice Hall, p.220.

13. Coulthurst, N. (2002) Management control using variance ratios.[Online.] available from: http://www.accaglobal.com/publications/studentaccountant/717098 (Accessed on 20 February 2010)

(14) Alkaraan, F. & Northcott, D. (2006)’Strategic capital investment decision-making: a role for emergent analysis tools? A study of the practice in large UK manufacturing companies’, The British Accounting Review, 38 (2), pp 149-173, Elsevier SD Freedom Collection [Online]. DOI: 10.1016/j.bar.2005.10.003 (Accessed 7 February 2010).

15. Kaplan, R.S. (1984) ‘The evolution of management accounting’, Accounting Review,

59 (3), pp.390-418 [Online.] Available from: http://www.jstor.org/stable/246701 (Accessed on February 2010).

16. Davis, R. (2010) Balanced Scorecard:  Panacea or poisoned chalice? [Online.] Available from: http://www.drrobertdavies.com/balancedscorecardsuccess.php (Accessed: 6 February 2010).

17. Microsoft Office Online (2010) Customer profitability analysis [Online.] Available from:

http://office.microsoft.com/en-us/templates/TC011507361033.aspx (Accessed: 23 February 2010).

18.Atrill, P. & McLaney, E. (2009) Management accounting for decisions makers. 6th ed. Harlow, England: Financial Times/Prentice Hall, p.138.

19. Guven-Uslu, P. & Conrad, L. (2008) ‘Uses of management accounting information for benchmarking in NHS trusts’, Public Money & Management, 28 (4), pp. 239–246, Wiley Interscience [Online]. DOI: 10.1111/j.1467-9302.2008.00650.x (Accessed 30 June 2009).

20. Henricks, M. (1998) Beneath the Surface [Online.] Available from: http://www.entrepreneur.com/magazine/entrepreneur/1999/october/18388.html (Accessed: 23 January 2010).

21. Atrill, P. & McLaney, E. (2009) Management accounting for decisions makers. 6th ed. Harlow, England: Financial Times/Prentice Hall, p.391.

22. Davis, R. (2010) Balanced Scorecard:  Panacea or poisoned chalice? [Online.] Available from: http://www.drrobertdavies.com/balancedscorecardsuccess.php (Accessed: 6 February 2010).

23. Alkaraan, F. & Northcott, D. (2006)’Strategic capital investment decision-making: a role for emergent analysis tools? A study of the practice in large UK manufacturing companies’, The British Accounting Review, 38 (2), pp 149-173, Elsevier SD Freedom Collection [Online]. DOI: 10.1016/j.bar.2005.10.003 (Accessed 7 February 2010).

24. Intel (n.d.) Moore’s Law [Online.] Available from: http://www.intel.com/technology/mooreslaw/ (Accessed 23 February 2010).

[*] =unassigned reference

Anderson, K. &Kerr, C. (2002) Customer relationships management, Google Books [Online.] Available from: http://books.google.cz/books?id=DE2Pbd_qmgkC&pg=PA104&lpg=PA104&dq=customer+relationship+management+google+kerr+anderson&source=bl&ots=6-JAUMnueD&sig=fYRb1mL0_WnSSKuERBpR9BEXJno&hl=cs&ei=V-aDS7LJCJKUnwPA1qzDAg&sa=X&oi=book_result&ct=result&resnum=4&ved=0CBMQ6AEwAw#v=onepage&q=&f=false(Accessed 23 February 2010).

25. Atrill, P. & McLaney, E. (2009) Management accounting for decisions makers. 6th ed. Harlow, England: Financial Times/Prentice Hall, pp.410-442.

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