COMPANY ECONOMIC CONTROL (BUDGETS)
INDEX (A1) RELATION BETWEEN BUDGETS AND BUSINESS PLANNING page: 4 – 5 (A2) RELATIONS BETWEEN THE DIFFERENT FUNCTIONS THAT REALISE THE BUDGETS IN THE BUSINESS PLANNING page: 6 – 7 – 8 (B1) TYPES OF BUDGETS THAT AFFECT THE HOTEL PLANNING page: 9 (C1) ELEMENT OF BUDGETS page: 10 (C2) ANALYSIS OF THE ELEMENTS OF THE BUDGETS page: 11 (D1, D2, F1, G1) ANNUAL BUDGETS page: 12 (E1) THE IMPORTANCE OF MAKING A BUDGET BY INVOLVING THE STAFF page: 12 – 13 (E2) BUDGETS OF EACH DEPARTMENT page: 14 (H1) METHODS FOR BUDGET CONTROLLING page: 14 – 15 (H2) ANALYSIS OF POSSIBLE CHANGES IN BOTH BUDGETS page: 16 – 17
RELATION BETWEEN BUDGETS AND BUSINESS PLANNING (A1) BUDGETS’ PURPOSES
Budgets have always played a key role in managing an institution, both private and public, being an important control system in many companies. Otley sees the budget as the central stage of most organizations’ systems of management control. The overall objective of the budget is to keep control of the activity done in the company by providing a roadmap for future activities and to set a series of goals to be achieved and the means by which to achieve those goals. Therefore the management efficiency can be appreciated by the achievement of predefined objectives and the means used to their achievement. There are several empirical studies that demonstrate that budgets are one of the most used planning and control tool for companies. Managers are responsible for the realization of the indicators within their budgets and for any variance from the estimated values, cases in which they are required to take remedial action. Budgets are used by management for different uses: control income and expenditure (the traditional use) establish priorities and set targets in numerical terms provide direction and co-ordination, so that business objectives can be turned into practical reality assign responsibilities to budget holders (managers) and allocate resources communicate targets from management to employees motivate staff improve efficiency monitor performance
https://www.youtube.com/watch?v=xjDH4zl4Ha4
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When the hotels make their business plan, they have to establish some objectives for the whole year. To achieve this objectives, it's needed to carry out several strategies and tactics. FOR EXAMPLE: -Objective: To increase the leve of satisfaction in 2 months a 25% -Tactic: To reduce the time when checking-in and checking-out.
This tactic is an extra cost for the company, as we have to increase the number of our staff at the reception and also to install another programme which carry out the operation. It is needed to consider this extra cost and take it into account in our annual budget. We should know at all times if there is money enough for all the actions we want to do in the company. For this reason, it's important to have a correct evaluation of our budget, where we will see all the operations that the hotel will have. In this way, we will have a proper knowledge about the management and the panning of the hotel. The budget will also reflect the Income Statement, this is, what the hotel produce. It is essential for us to know all this information.
The budget will also help us the be in advance about the future in business term, as every month for example, we can forecast or make a prediction of our sells or any other matter. In conclusion, the budget objective is to create a business plan, and through it, we can carry out our plan. We need the budget to monitor or control the operations. http://conferinta2013.academiacomerciala.ro/_VOLCONF2013PDF/volumconferinta/PURPOSE%20FOR%20BUDGETING%20%20LITERATURE%20REVIEW_pintea.pdf
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RELATIONS BETWEEN THE DIFFERENT FUNCTIONS THAT REALISE THE BUDGETS IN THE BUSINESS PLANNING (A2)
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1. Planning operations that ensure the companies’ strategic objectives realization. Budgeting process stimulates managers to predict all the problems before their appearance and thereby avoid making hasty decisions in the event of certain undesirable situations in the future. We can say that budgeting "guarantees" that they will plan future operations depending on how it was accomplished the previous budget, taking into account all the factors that have influenced changes regarding previous budget indicators.
2. Coordinating various activities of different types of subdivisions. Coordination of each employee and groups interests. Each subdivision of an economic entity has its own objectives and this can lead to situations in which these goals are contradictory in relation to other responsibility centers. So, the budget has the role to reconcile and regulate these contradictions in favor of the economic entity so that these situations can be prevented.
3. Stimulation of managers from all business levels to achieve predetermined goals of each responsibility center. This budget feature strongly manifests in case of participative budgeting when responsibility center managers can propose various quantitative indicators. Therefore the budget indicators are indicators not forced to realize from the center but settled by mutual agreement with the management of each responsibility center.
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4. Control of current activity, ensuring discipline according to the business plan. Careful drafting of budgets ensures the optimum standard to compare undertaken activity achievements, to determine deviations and to take measures to eliminate them.
5. Evaluation of plans fulfillment by each responsibility center and their managers. Management performance can be appreciated by comparing the results with those expected to be achieved.
6. Training managers and other employees from financial services of a company. Budgets are considered to be highly beneficial to companies. The usage of budgets has a number of advantages: Requires the use of planning in business management. Represents the framework for assessing performance due to indicated parameters that the company needs to realize in order to achieve her objectives. Promotes communication and coordination for engagement and balancing all departments and functions of the company in order to achieve its set objectives. Undertakes responsibility center managers to foresee the consequences of decisions made or to be taken, budgets representing a landmark in decision making. Allows the existence of an efficient accounting information system that provides all kinds of information necessary for users (especially internal ones). Provides leadership through exception because if the budget is well-designed, management needs to intervene only in situations where there are deviations from budgeted indicators. Ensures participation in the planning activity of both management and performers that drives involvement in achieving or exceeding budgeted indicators. http://conferinta2013.academiacomerciala.ro/_VOLCONF2013PDF/volumconferinta/PURPOSE%20FOR%20BUDGETING%20%20LITERATURE%20REVIEW_pintea.pdf
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TYPES OF BUDGETS THAT AFFECT THE HOTEL PLANNING (B1) Annual budget
Long-range budget
Cash budgets
Achievement budget
Operations budgets
Capital budgets
https://www.youtube.com/watch?v=H8lfzP0eGGc
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ELEMENT OF BUDGETS (C1)
http://fspbusiness.co.za/ http://budgetandthebeach.com/2013/06/26/the-5-elements-of-a-successful-budget/
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ANALYSIS OF THE ELEMENTS OF THE BUDGETS (C2) Element 1: Fixed expenses These are the expenses you know your company will incur every month. These include expenses such as rent, insurance and salaries. You have to account for these expenses first so you know you can cover them without fail. Separate them by highlighting them in a different colour. Element 2: Variable expenses These expenses change from month to month depending on your company's position and rate of sales. If your company sells less, your expenses, such as telephone costs, could decrease because of fewer sales calls. Just because these vary from month to month doesn't mean they're not important so ensure you can account for them each month. Element 3: Once-off expenses These aren't very important expenses and often you can choose when you incur them. For example, the expenses of servicing a company car is a once-off expense that you can choose whether you do it this month or next month. Element 4: Fixed income Fixed income is the guaranteed monthly amounts you get from regular clients. These are people you might have contracts with, for example. Because you know you'll get this money each month, it's more reliable and, therefore, you can account for it first. Element 5: Variable income Variable income comes from once-off purchases from new clients. These are people who don't have contracts with you so you might never do business with them again. If your budget contains these five specific elements, it will be effective every time. https://www.youtube.com/watch?v=WPCu-s-heio
http://fspbusiness.co.za/ http://budgetandthebeach.com/2013/06/26/the-5-elements-of-a-successful-budget
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ANNUAL BUDGETS (D1, D2, F1, G1) https://drive.google.com/open?id=0Bzj5xz4TCzZcekVVODJnQmxRZ00
https://www.youtube.com/watch?v=f1QKIywaRNc THE IMPORTANCE OF MAKING A BUDGET BY INVOLVING THE STAFF (E1) Budgets can be used to motivate your staff to be more fiscally minded, to pay greater attention to detail and to think before they act. The use of budget requires to involve the company staff in the development, use and monitoring of the budget results and it is used as a motivational tool. In our hotel, it is important to make our staff to participate; for example, we should give information to the kitchen manager about the budget we've got and he or she could help us to take decisions when preparing the courses or choosing a provider or another. This is, it is important that the staff participate in the operations needed to make, and in this way, they will also feel more motivated, as they are being considered when taking decisions, and they will also feel satisfied with their work and their participation in the company management.
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In the other hand, if the workers know information about the budgets, for example, about income and expenses, they will feel more confident and they will feel part of the company.
A clear example of it could meet in reception. If we involve the front office manager of the occupation expected for each month, we will make him or her to participate in the decisions taken and the budget. Like this, if at any moment of the month when the sells are lower, the front office manager and the receptionists could think to make promotions in accommodation with lower and more attractive prices in order to sell more rooms, as they all are on charge of the reservations department (in case it's a big hotel) and they can solve the possible issues that may occur. The front office manager could make weekend promotions, discounts for kids, packs including activities outside the hotel... etc.
For this reason, it is important that the responsible of reception, together with the receptionists know and follow the annual budget; like this, they will be involved and more motivated with the job, as they collaborate giving ideas and solutions. There exist other general matters about budget formation and evaluation, as: –
Employees who have a stake in the budget are more likely to adhere to its goals and objectives.
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To recognise the performance. To use the budget as a motivational tool, the general manager should recognise and award those employees who are taking part in the company decisions. It could also help to correct the employees who go away from the company goal.
http://smallbusiness.chron.com/budget-used-motivate-staff-50432.html
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BUDGETS OF EACH DEPARTMENT (E2)
METHODS FOR BUDGET CONTROLLING (H1) The business activity success requires to determinate specific objectives, to develop strategies and tactics to achieve them and the control of the results of that planning, in order to avoid desviations that obstruct us to achieve those objectives. In the annual budget is possible to detect all the company economic data for each month: the general expenses, incomes... etc. Like this, our control mechanism (our checkpoint) is based that in a certain time (in this case every month) we can compare the real information for each month of every sell point of our hotel (rooms, bar, banquet...) with the provisional data for that month (the forecast). With this, we can see the evolution of our activity and to detect the desviations met. As well, thanks to the checkpoints we can see where the desviations come from and what is the cause of them to correct them. This desviations may be positive or negative.
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It is important to carry out this control method in advance, this is, the earlier the best; like this we could take the measures or actions needed, for example, in a lower incomes of any sell point, as it could be the restaurant. We can take correcting measure for this to maintain the restaurant incomes, by doing offers or reduce lightly its service prices, for example. Thanks to the checkpoint we can see the evolution of the hotel annual activity. Another example is located in “other incomes� in the sell points on January; it was expected a 6%, and according to the real data, at the end it was a 4,75%. it is necessary to carry out a strategy. All the planning process requires a good control mechanism to be effective.
https://www.youtube.com/watch?v=oXhgwn-girI
http://www.expansion.com/diccionario-economico/control-presupuestario.html http://blog.sage.es/economia-empresa/la-planificacion-y-el-control-presupuestario-como-sistemas-de- gestion-de-laempresa/
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ANALYSIS OF POSSIBLE CHANGES IN BOTH BUDGETS (H2) Analyzing the real data and forescasted data of both budgets (A and B), we verified that there have been some deviations, which can affect us negatively and / or positively. When we making the budget, we are aware that these variations will always exist, what we have to try is that these variations are the minimum for the smooth operation of the hotel, maintaining the quality of our services. The deviations found in the hotel are both positive and negative: POSITIVE (Anything than boosts profits) ·Better than expected ·Costs lower than expected ·Revenue higher than expected NEGATIVE (Anything than reduces profit) ·Worse than expected result ·Costs higher than expected ·Revenue lower than expected To properly analyze our budget we have to take into account the following 4W's: 1. Find your variance – asking the question WHERE is there difference? 2. Understand the timing – asking the question WHEN is there difference? 3. Analyse the reason for the variance – asking the question WHY is there difference? 4. Take action – asking the question WHAT do I need to do next?
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WHERE
WHY
WHEN
WHAT
Analyzing our FORECAST, we can see that ForeCast A is better than ForeCast B, because the TOTAL YEAR INCOME of A is: 2.485.633'7 € and the TOTAL YEAR INCOME of B is: 2.269.420'00€. This is due to ForeCast A all its departments have more customers and, therefore, their benefits are greater. The price of its “Other Sales” is more expensive than the “Other Sales” of ForeCast B. Regarding to Banquettes Department, the Total Income of both are the same. But this result doesn't affect to TOTAL YEAR INCOME because all of the differents points of sales (rooms, restaurant, bar and other sales) are increased. We check some negatives variances in REAL RESULTS of ForeCast A about the months of January and February, in the points of sales of “Restaurant” and “Other Sales”. In this situation, the hotel must take measures to ensure that the result will be positive.
JANUARY
FEBRUARY
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COMPONENTS: ANA ISABEL CHICA MIRANDA LUZ MARÍA DELGADO MELGUIZO MARI CRUZ FERNÁNDEZ GÓMEZ MARTA JIMÉNEZ MARTÍNEZ CRISTINA ROMERO PADIAL
2º GESTIÓN DE ALOJAMIENTOS TURÍSTICOS