The three essential reasons that put a strain on the organizational budget are advertising, travel expenses, and the client party event. Not only do these represent the root of the existing budget variance, but they also highlight the weakest points in the company’s approach to budgeting. The management should have paid closer attention to the needs of the workforce instead of focusing on all-inclusive client-centeredness. The report shows that the majority of expenses are linked to entertainment in one way or another, which is also a hint at further steps.
First of all, the team will have to investigate any trend variances in order to make sure that immediate action is needed. With several larger variances present in the report, it may be safe to say that the budget has to be limited to achieve more realistic goals. In line with Weygandt et al., budget variance could also help the team manage product changes and the pricing strategy (563). The idea for the team should be to reconsider expenditures and find more sources of income while limiting the budget that is spent on entertainment and non-business decision-making. The team could as well focus on the possibilities that accompany utilities, loans, and salaries.
The next budget will become a better management tool in the case where the team ensures that processes are efficient and effective, with less money being spent on entertainment. Even though client-centeredness will be affected, it is going to be the best way of isolating challenges and changes while enhancing further variance analysis through removing obsolete and secondary variables from the equation (Weygandt et al. 563). In the future, the budget variance would also indicate the need for saving money and allocating it for business activities.
Weygandt, Jerry J., et al. Managerial Accounting: Tools for Business Decision-Making. John Wiley & Sons, 2018.