Budjetary challenges - Essay Example

Budgetary Challenges Introduction Opening a business is easy when all that is needed to start the business is present; like the starting capital, staff members, and premises. However, in order for the business to be successful and make a mark in this hard global economy, effective measures have to be taken regarding the decisions being made, assets, staff and a crucial aspect in any type of business; the customer. In order for a business be successful, the manager, staff and customers have to have a relation that exists between them.

Customer satisfaction is mandatory to any type of business, but then again the financial capability of the business has to be considered (Pride, Hughes & Kapoor, 2012). The capital to run a business is crucial, and in order to obtain profit, the money channeled out should be less than the money that comes in. Budgetary challenges occur due to lack of effective control practices and enough monitoring of the business capital. A business that does not have policies that help to govern the spending of money could have serious financial challenges that might more often than not lead to collapse of the business.

In this essay, a certain company, Money Cares Investment Corporation has some budgetary challenges that if left unattended will lead to financial ruin for the company. For a start, possible risks would include financial difficulties, colossal debt and thus it will be forced to declare itself bankrupt (Weygandt, Kieso & Kimmel, 2010).  When there is an overspending, there is bound to be risks involved. In this business, it is comprised of; CEO, Financier, a manager, 3 investment specialists, and 2 clerical assistants.

If the business fails to make profits, there will not be enough capital to run the business and at the same time pay off debts. The most logical thing to follow will be to cut back on the business spending in terms of salaries. This will mean that some employees might lose their jobs (Wood & Sangster, 2008). This will lead to more workload thus the business will not be able to run its affairs smoothly. The result is that there will be a lack in coordination in the business between the staff, manager and the customers.

The customer service will be affected thus customer base falls. This leads to more loses, and eventually the business is declared bankrupt. In order for this company to succeed, certain steps and policies have to be established that will govern the possible misuse of capital (Weygandt, Kieso & Kimmel, 2010). Regulation of money in any business is essential for the business to stay afloat and make an economic break through. Most of the time, money in a business is spent without the proper follow-ups, and this leads to a decrease in business capital, and a decrease in profits.

For proper regulation of business capital, priorities have to be set and followed. The most valuable thing to start with is to look for the major users of the business capital. For this businesses’ case, most of the money is channeled towards market supplies, transportation, and the hospitality of customers, probably to make sure that they are retained. To ensure that the company does not end up in ruins, there needs to be a reduction in terms of spending for the company (Garrett, Graddy & Jackson, 2008).

Certain cutbacks have to be made, though they are mostly about which aspect is crucial. Employees should be retained, and a more strategic spending procedure be outlined. The companies’ assets, which include current assets, liquid assets and absolute liquid assets can be channeled towards providing a positive economic feedback to the company (Zenios & Ziemba, 2007). Tangible assets for such a company may include buildings, business vehicles and the equipment used in the office by the staff.

Ability to be converted is into cash whenever needed is an advantage, and thus make up a considerable part of the company’s source of alternate income. Other forms like intangible assets which may include the professional experience and knowledge of how the business is run, or the reputation of the business may not add any financial help to the business, but what they add are the value and enable the company to stay afloat (Anson & American Bar Association, 2007). One of the most vulnerable places that are vulnerable in the business is its finances, and the royalty of customers (Zenios & Ziemba, 2007).

References Anson, W., & American Bar Association. (2007). The intangible assets handbook: Maximizing value from intangible assets. Chicago, Ill: ABA Section of Business Law. Garrett, E., Graddy, E., & Jackson, H. E. (2008). Fiscal challenges: An interdisciplinary approach to budget policy. Cambridge: Cambridge University Press. Pride, W. M., Hughes, R. J., & Kapoor, J. R. (2012). Business. Mason, OH: South-Western Cengage Learning. Weygandt, J. J., Kieso, D. E., & Kimmel, P. D. (2010). Managerial accounting: Tools for business decision making.

Hoboken, NJ: Wiley. Wood, F., & Sangster, A. (2008). Frank Wood's business accounting UK GAAP. Harlow, England: FT Prentice Hall. Zenios, S. A., & Ziemba, W. T. (2007). Applications and case studies. Amsterdam: Elsevier.