The Utilization of Operational and Cash Budgets - Term Paper Example

CASE STUDY REPORT ON FINANCIAL ACCOUNTING FOR HOSPITALITY BUSINESS By (Student’s Name) Professor’s Name Course Name 19th August 2012 1.0 Table of Contents A. Executive Summary.............................................................................................................….3 B. Introduction..........................................................................................................................….4 C. Main Body of the Report………………………………………………………….................5 D. Conclusion and Recommedation……….................................................................................9 References…………………………………………………………………………………….11 2.0 Executive Summary While conducting this research report, it was clear that the firm is trading on risky grounds. This is because of the risks involved due to the traditional methodology used in accounting postings in matters pertaining to expenses (Loader 2002, p.168). The findings stipulate that the operation of the company’s activities can be enhanced by deploying relevant cash handling and control procedures. The desire of the restaurant to expand its investments activities is likely to be catapulted by embracing cash and capital budgeting decision making processes. The amount of future profits to be realized by the restaurant’s operational activities can in turn increase productivity as well as communication between the various departments existing within the restaurant as a whole. The recommendations put forth include: the general manager should take steps needed to embrace effective utilization of such accounting procedures as cash control measures, cash handling procedures as well as cash and operational budgets as a whole. Secondly, the restaurant should embrace effective accounting cash handling procedures because it eases the relations the restaurant has with such external factors as tax institutions and auditing procedures. Lastly, the management should embrace effective cash handling and control procedures for the mere reason that it minimizes incidents of fraud and cash abuse 3.0 Introduction: The process of handling cash and other assets within a business is considered to be a crucial aspect needed in the success of any business: small and medium-sized businesses alike. This is basically done to ensure future survival of the business at hand lest the cessation of its operations altogether. In this case, the international hotel is handling its cash matters with the least utmost care necessary. It should be noted that since the business is a large entity in terms of its operations, they are assumedly numerous cash collections points which when left unattended for will result in huge loss of the current asset: cash. Control measures are expected to be put in place to ensure that no cash is lost or is unaccounted for. Also, the processes of both cash and capital budgeting are required to be conducted in a manner that follows stipulated procedures for easier accountability purposes. Before developing the report, authorization was granted by both the shareholder as well as the manager of the Company. The main focus of the report is on determining the importance of embracing postulated policies and procedures in matters pertaining to cash handling and control procedures as well as the role played by cash and capital budgeting in the day-to –day operations of the restaurant at hand. The scope of the report is entirely based on current issues affecting the business altogether. The issues to be investigated include possible loss of cash as well as traditional approach utilized while accounting for expenses altogether. While conducting this report, secondary forms of research materials are used since they are cheap to obtain and are easily available. Peer reviewed journals will constitute the majority of the informational resource. 4.0 Main Body Report: Case Study Report On Financial Accounting for Hospitality Business Cash Handling Procedures: It is important to put in place stringent and workable cash handling procedures since there is always the aspect of temptations when it comes to management of cash resource of a business. It is fair to postulate that when employees are granted the risk of carrying with them colloquial amounts of money they become subjects to elements of fraud or abuse. In this case, the general manager might unknowingly be tempted to mishandle the cash reserve hence increasing risks attributed to mismanagements of cash altogether. notwithstanding, the benefits of allocating numerous employees with the mandate of handling cash formulates the necessary platform under which useful cash control procedures can be handled. Also, it is possible that the unpremeditated misuse of cash by the manager might cause the organization great deal of negative publicity especially because deployed tax auditors might formulate poor impression of the company as a whole. Furthermore, it is postulated that sound basis for cash managements or rather handlings creates a favorable working environment to each and every employee concerned. The fact that the cash handling duty is delegated to different employees cultivates their morale for the betterment of the firm so that elements of diligence, professionalism and trust forms the order of the day altogether. Employees get motivated whenever they feel that they are trusted with the assets of the company and thus, will increase their production capacity especially because they are assigned with diligent tasks altogether (Bennett & Savani 2012, p. 485-509). Cash Control Procedures: The main advantage attributed to deploying effective and efficient cash control procedures lies with the fact that cash collected is well planned for hence meeting the objective of the firm altogether. Effective cash control procedures ensures that the amount of assets collected is far much more than the one invested by the company at hand. In this case, the unpremeditated handling of the cash in credit cards by the general manager disputes the point raised as above. Since the company is an international company it is assumed that its working operations are met within certain set budgets (The Receivables Report 2009, p.3-4). Set budgets are only possible in the event that the general manager chose to control the deposits. Since cash control involves the steps taken to ensure that both collection and disbursements of cash are conducted effectively. The premeditated mismanagement of cash by the GM might minimize efforts required in effective posting of accounting items. Efficient cash controls in turn, protects other sensitive assets within the company, establishes definite lines of responsibilities within the organization as well as catapult the effective operations of the firm at hand. Also, it should be noted that the general manager is able to distinguish between normal record- keeping from efficient methodology of handling current assets, in this case, cash (Texas A&M University 2010). Operational and Cash flow Budgeting: A budget refers to a meditated plan which is utilized for effective meeting of goals of an organization as a whole. As companies receive funds as well as spent them altogether, it is a prerequisite requirement that firms formulate methodologies which when put in place leads to effective utilization of the cash asset at hand. In our case, it is encouraged that the restaurant embrace the use of operational budgets since they assists in depicting past performances as well as portray financial plans which is the fundamental platform upon which future goals of the company are meet. The fact that the restaurant possesses the desire to expand its operational activities even further is thus encouraged that it embraces the accounting procedure of formulating financial plans. Sales revenue as well profits are financial items which are expected to have been long premeditated with utilization of operational budgets. Thus, it is almost impossible to predict future cash flow patterns making it stringent for the firm to predict its operational survival in the future altogether. Furthermore, the utilization of cash and operational budgets enhances the level of communication platforms upon which various departments in the organization operate effectively (Head 2000, p.7). Delegation of responsibilities dealing with cash assets management to several employees within the organization assists in promoting coordination between the various departments operating within the restaurant as a whole. In case the objectives of the restaurant prove difficult to meet, operational and cash budgets helps in figuring out alternative channels of action hence enhancing the survival of the company (Foresster and Gitman 1986, p.15). Capital Budgeting The process of capital budgeting involves the formulation of management and planning processes which help in seeing to it that long-term investment portfolio of an organization are meet. It catapults important channels of financial evolution in respect to the future cash flows of the firm’s size, timing as well as fundamental risks involved altogether. Effective capital budgeting involves the fundamental stages needed for planning the capital expenditures, critical evaluation as well as choosing for long-term investments as well as assisting in the control of capital expenditure. The restaurant needs to deploy capital budgeting techniques mainly because they help in determining future benefits of a company as a whole. Long-term investments are made possible only through the employment of capital budgeting. In order to deploy effective capital budgeting, the general manager is expected to allow fundamental accounting practices of posting items be used in recording both expenditures as well as receipts altogether (Mazin 2008.p.116-129). 5.0 Conclusions and Recommendations: The utilization of operational and cash budgets is considered to be an effective methodology which is used to meet the long-term investments of the hotel. Also, they are used to depict past performances of a company which is, in turn, used to catapult the process necessary for meeting the overall objectives of the restaurant. Prediction of the restaurant’s sales revenue is dependent upon the effective utilization of cash and operational budgets. Effective portrayal of cash control measures are a perquisite to a company’s future survival in respect to its operations as a whole. Effective capital budgeting involves the fundamental stages of planning the capital expenditures, critical evaluation as well as choosing for long-term investments as well as assisting in the control of capital expenditure. Efficient cash controls in turn, protects other sensitive assets within the company, establishes definite lines of responsibilities within the organization as well as propels the effective operations of the firm at hand. Thus, the recommendations to be put forth are: Firstly, the general manager should take steps needed to embrace effective utilization of such accounting procedures as cash control measures, cash handling procedures as well as cash and operational budgets as a whole. The main reason being that it will not only increase coordination of various departments but also catapult the platform upon which communication is enhanced. Effective coordination and communication channels enhance productivity hence high sales revenue that translates to wealth. Secondly, the restaurant should embrace effective accounting cash handling procedures because it eases the relations the restaurant possesses with such external factors as tax institutions as well as auditing procedures. Thirdly, the management should embrace effective cash handling and control procedures for the mere reason that it minimizes incidents of fraud and cash abuse. Both meditated as well as premeditated mismanagement. References Bennett, R & Savani, S, 2012. Complaints-Handling Procedures of Human Services Charities Volume 21, Issue 5, p.484-510 Foresster, K, and Gitman, J, L. 1986. Maximizing Cash Disbursement Float: introduction Importance of Cash Management, Vol.5, Issue 2, p.15 Head, K. 2000. Cash Counts do Count, The Internal Auditor Journal Article, Vol. 57, Issue 2, P.71 Loader, D, .2002. Controls, Procedures and Risks, Operations Management Series, City West Main Collection, p.168 Mazin, A, M, 2008. Internal Regulations and Procedures for Financing Trading Units, Journal of Banking Regulation, Vol.9, Issue 2, pp.116-130 Texas A&M University, 2010. Guidelines for Cash Handling Procedures, Retrieved 18th August 2012 from http://finance.tamu.edu/fmo/sales/docs/ cash-handling-procedures.asp The Receivables Report, 2009,Audit your Cash Processes, New York, United States, Aspens Publishers, Vol.24,p.3-5. Read More