Review the video The Importance of Budgeting above, using that information and your research, think of a company you may want to open in the future. Select one of the areas discussed in the video related to how you would use budgeting in your new business. In your discussion, provide a specific, relevant example of the advantages and disadvantages of budgeting in your new business. In addition, discuss ethical concerns that may occur as your company is preparing a budget.
this is two discussion
the business that I would like is the same than before… NVOCC international business
RE: Week 6 Discussion
Starting a new business can be scary that is why I choose to talk about creating short-term and long-term budgets from the video we watched. I believe that all businesses need to have budgets in order to be successful. Budgets are essential for developing a plan for how to spend money and save for priorities (Budgeting 2019). Long-term budgeting is necessary for the growth of the company. The business that I plan on opening would be a fast-casual Mexican restaurant.
For long-term growth, my budget would focus on expanding to food trucks or the possibility of opening more locations, this would be dependent on the fact that we do well with sales and keep customers happy for return visits. For the short term, the budgets would be important for payroll, insurance, and taxes (Budgeting 2019). Being able to keep employees paid and pay for the cost of operation would be the first set of short-term goals to reach within the budget.
In the restaurant industry, I believe a flexible budget would make the most sense to use. Flexible budgets are estimates of what costs should be compared to the level of activity and can be used for performance evaluations (Noreen 2022). Flexible budgets allow for comparison and can help with future planning. This is important to avoid hard budget constraints which means a company must use all sales to cover the cost of production without the ability to save for the future (Linz 2004). Improper planning and budgeting can lead to bankruptcy or closing down completely.
Budgeting. (2019). In Encyclopedia of Management (8th ed., Vol. 1, pp. 71-74). Gale. https://link.gale.com/apps/doc/CX7617900033/GVRL?u=lirn99776&sid=bookmark-GVRL&xid=4160f5e4
LINZ, S. J. (2004). Hard Budget Constraints. In J. R. Millar (Ed.), Encyclopedia of Russian History (Vol. 2, p. 626). Macmillan Reference USA. https://link.gale.com/apps/doc/CX3404100552/GVRL?u=lirn99776&sid=bookmark-GVRL&xid=87b576a1
NOREEN, E. R. I. C. (2022). Managerial accounting for managers. MCGRAW-HILL US HIGHER ED.
2. RE: Week 6 Discussion
Many new entrepreneurs are unrealistic about how long it takes for a new business to generate profits. As a result, many may find themselves pulling money from their retirement accounts, pulling money out of personal or saving accounts, or borrowing funds from banks or friends. Although many are excited about starting a business, many struggles with the financial aspects of launching or running a business. Because many do not properly plan, many overlook creating a budget. A budget that is accurate and flexible can assist entrepreneurs in the decision-making to determine success the of their business (Thottoli, 2021 & Ali et al., 2018).
An important aspect of running a business would be establishing a budget so that you are aware of your numbers. Creating a budget can provide a business owner with the tools for short-term planning and control, assist with decision-making about alternative courses of action, and reflect on the operating capacity. They can be used in both operational and strategic functions in a business (Mareike et al., 2020).
There are advantages and disadvantages to budgeting. Budgeting can be very time-consuming, add little value given to the time prepared required to prepare them, or is often based on unsupported assumptions and guesswork (Mareike et al., 2020). At times the budget was literally an assumption because I didn’t reach my sales goals. The advantages of budgeting can be the key to the survival of the business. The budget can outline and set objectives for future plans (Asogwa & Etim, 2017). Personally, it has helped me establish sales goals and accurately make decisions about seminar locations, marketing expenses, and other relevant costs because I had numbers from an established budget. Ethical concerns could occur if the forecasting was unrealistic and planned a way to properly cover expenses. I would also add not cutting on quality or service to gain profits.
As an entrepreneur who’s growing a business and have created more expenses before generating income. Expenses like website template, logo design, graphics, website hosting, marketing expenses, and internet service were adding up fast. In the past monthly expenses totaled $450. I had to reevaluate my expenses because the business expenses were being covered out of my personal budget. By looking at my personal budget and the new expenses incurred by the business, I had to decrease the expenses of the business and create a more realistic budget that my personal income could cover. This required eliminating certain expenses or finding a way to lower expenses until the business started making money. The new expenses are approximately $150 per month.
Lastly, I create a sales revenue goal by quarter. The assumptions allowed me to set goals for marketing to attract clients to cover expenses and also cover expenses. After I started earning some revenue, I was able to cover the expenses of the business. The simple budget that I created allowed me to set prices accordingly and to cover the monthly business expenses. The budget also allowed me to create a plan and budget for yearly sales goals. I can also ensure that I can cover the monthly expenses when the business has slower months.
Asogwa, I. E., & Etim, O. E. (2017). Traditional budgeting in today’s business environment. journal of applied finance and banking, 7(3), 111-120. https://0624na6u3-mp02-y-https-www-proquest-com.pr…
Mareike, B., Brück, C., Thorsten, K., & Anja, S. (2020). Digitization of the budgeting process: determinants of the use of business analytics and its effect on satisfaction with the budgeting process. Journal of Management Control, 31(1-2), 25-54. http://0624na6nt.mp02.y.http.dx.doi.org.prx-keiser.lirn.net/10.1007/s00187-019-00291-y
Thottoli, M. M. (2021). Antecedent of lack of proficiency and the need for an automated financial plan for the course entrepreneurship creativity and innovation. Journal of Ethics in Entrepreneurship and Technology, 1(1), 61-76. http://0624na6u3.mp02.y.http.dx.doi.org.prx-keiser…
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