Budget Monitoring and Format: Money Cares Investment Corporation - Research Paper Example

? Budget Monitoring and Format (an Individual Project) Budget Monitoring and Format (an Individual Project) Problematic orRisk Areas in the Company’s Financial Procedures Money Cares Investment Corporation has provided a credit card to each of the three investment specialists for carrying out expenses in marketing supplies, transportation, and workshop items including hospitality items for customers. Since there is no monitoring and control policy, Money Cares is exposed to the following risks. Business Risk Money Cares Investment Corporation is likely to face business risks as it would lose the competitive edge in the market due to the wastage of finances by their investment specialist. The over-expense incurred by the investment specialists would tighten the amount of idle funds left for the company to meet the short term liabilities (Handlechner, 2008). Operational Risk The Money Cares Investment Corporation would face operational risks as the funds required for its daily operations would be curtailed due to the wastage of finances by means of credit cards for obtaining marketing supplies, transportation, and hospitalities. Financial Risk The budget planned for Money Cares Investment Corporation includes the estimated expenditures and the anticipated sources of the revenue in order to generate the future cash flow and meet the future liabilities. As a result of the over-expenses incurred by the investment specialists by the use of credit cards, it would lead to the deficit in the cash flows of future, thereby, posing financial risks in terms of the shortage of liquidity. Actions for the Company to Succeed In order to create a situation for the company to succeed, there should be a sufficient control established along with the continuous monitoring for the budgetary expenses planned for the company. The budgetary allocations are series of actions involving planning, implementation, and monitoring. In order to succeed, the company should construct a system of approval for the use of credit cards by the investment specialist. The CEO and Finance department should ask the clericals of the company to undertake the official work of recording the expenses on a daily basis. The expenses to be incurred by the usage of credit cards need to have a prior approval form a responsible authority. The investment specialists are also to be held accountable for the income generated and the expenses proposed by them. Thus, a proper budgetary control and monitoring system would help the company to succeed (Husson, 2002). A tally of the records will help the company to understand what amount of limit is left to be against the budget plan. This implementation of the budgetary control will help to prevent over-expenses of the company. Company’s Most Vulnerable Areas The most vulnerable areas of the company are the financial procedures and instruments used for the funding of the daily operations. This involves the role of the manager and the three investment specialists. The company has chosen to use credit cards in order to access funds required for transportation and hospitality of customers while having expenditures for food and drinks and marketing supplies of its solutions. The absence of a cost control mechanism supported by a lack of monitoring by the company has given a free hand to the investment specialists. The ownership of the investments by the specialists under such a process is under question. Thus, the control mechanism for monitoring the expenses of the company is the most vulnerable area of the business of Money Cares Investment Corporation. The Company’s Assets The company’s assets are the short term cash positions held by the company which help them to service the short term liabilities. The liquidity level of the company helps them to service the expenses on credit cards and other short-term credits acquired by the company. The net current assets of the company help them to meet the cost of daily operations that include transportation costs, marketing of its solutions and servicing of customers. The company’s long term assets include the fixed assets that are optimally utilized to service its long-term liabilities. The short-term and long-term liabilities include funds taken for the customers by the management in order to provide them with a better return in future. The wealth of the customers forms the major part of the company’s liabilities which need to be serviced from the assets of the company. Usage of Money by Money Cares Investment Corporation The money is mostly spent for marketing the supplies. Investment solutions provided by the corporation are a highly competitive business. Due to this, much freedom has been provided to the investment specialists who are the direct interface to the customers and who realize the importance of the fund management in order to earn revenues for the company. Thus, most of the money is spent by the investment specialists in marketing their supplies to the customers. This activity requires plenty of travelling by the employees of the company for which transportation cost is incurred with the money. The other operational expenses include hospitality for customers - offering them food and drinks. Since this is a small company with around eight employees, a part of the money is spent on the salaries, maintenance, and administrative expenses. Regulation of Budget Activities The budget activities need to be regulated in order to meet the planned expenditures with the anticipated revenues of the company. The regulation of the budget activities includes a proper consultation for the stakeholders of the company including the CEO, managers, investment specialists and the clerical staff which will address the areas of expenses of the short-term as well as of the long run. The regulation of the budget at the planning stage would help to reduce the gap between the actual costs and the expected costs (Hofstede, 2012). Thereafter, a tight control and monitoring mechanisms need to be kept in place in order to prevent over-expenses of the budget. For this an approval mechanism needs to be implemented for regulating the daily expenditures through the use of credit cards by the investment specialists. Lastly, the employees bearing the expenses would need to be accountable for the costs incurred by them during daily operations of the company. The employees would have to be the best judge of the return on investments of the company in order to implement the budgetary activities. References Husson, J. F. (2002). Budgetary procedures and budget management at local authority level: Report. Strasbourg, Cedex: Council of Europe Pub. Hofstede, G. H. (2012). The game of budget control. New York, NY: Routledge. Handlechner, M. (2008). Risk management. Norderstedt, Germany: GRIN Verlag. Read More