Budgetary Planning Featuring Babycakes-Accounting

A business must have a good system and well-formulated budget for it to succeed. A budget is essential in reflecting the monthly performance of the business. Businesses can track their financial progress by using budgets. Babycakes is a small bakery that has opened up a new store before Valentine’s Day. The bakery owner needs a budget which will reflect their financial progress. The owner will determine the progress through the budget. The budget will reflect the financial gains of the bakery before and after its expansion. The financial benefits of the forthcoming holiday will be determined after budgeting. 

A structured plan is essential for the development of an enterprise. Structured plans assist the business owners to concentrate on resources to improve the profits, reduce expenses, and increase the returns on investments (Infoentreprenuers, 2009). A realistic budget will assist the bakery owner to determine her product needs. Further, a realistic budget will assist the bakery owner to identify her financial needs. The bakery owner will decide whether or not she is overspending and eliminate the unnecessary costs. The budget will track all the expenses in the bakery. The budget will establish the daily performance of the bakery and facilitate the elimination of waste to improve the products. The bakery owner will establish possible risks through the utilization of the budget. As a result, the owner can create plans to overcome potential dangers in the future. Budget assists companies to predict the unforeseeable activities (Nelson, 2005). Therefore, it can be difficult for Babycakes bakery to operate effectively without a budget. 

There is a need for a sales budget for the Los Angeles Babycakes bakery. The sales budget will be for the 4 th quarter of 2016. The Los Angeles store will generate income for the first time. The sales budget for the fourth quarter is essential in making future comparisons of the bakery’s financial performance. The sales budget will for the 4 th quarter of 2016 is helpful in determining the financial outcome of the holiday and expectations of the new store. 

Sales Budget for the New Bakery 

The budget indicates a constant rate of sales in the new bakery. It is presumed that the bakery will sell 750 pieces for three months. The price of each product is $ 1.75. The bakery expects to make sales that amount to $ 1312.50 in a day. The total sales for every month are $ 39,375. It is anticipated that the bakery will earn a total of $ 118, 1250 after three months. 

The performance of the Babycakes bakery in New York is high. The establishment of the bakery in new locations around the country will give the citizens an opportunity to taste their delicious products in regular days and holidays. Babycakes bakery has decided that they will introduce three new products in October, November, and December. The bakery will launch a new product every month. Babycakes bakery will introduce Bat Brownies in October. The aim of introducing the Bat Brownies is to meet the preferences of the customers. Subsequently, Babycakes bakery will introduce the Pumpkin Bread in November. The objective of making the Pumpkin Bread is to meet the taste needs of families, friends, or individuals. Finally, the bakery will introduce the Snowman Cookies in December. The purpose of making the Snowman Cookies is to meet the taste needs of individuals and groups. 

Businesses compete with each other to achieve a high market share in the industry. The business owners should know perceptions, marketing, and goals for them to succeed in the industry. The business owners can incorporate strategies to attain a leading position in the industry (Conner, 2013). The introduction of the three new products of Babycakes bakery will improve the image to the public. The customers will perceive that Babycakes is trying to compete with other bakeries through the introduction of new products. The other purpose of introducing new products to the market is to attract new customers. The bakery is aiming at retaining the available customers by introducing products with different tastes. 

The sales budget above indicates the net sales for three consecutive months. The budget illustrates high sales for the three months which indicates the success of the Babycakes bakery. Through the creation of the budget, Babycakes bakery will identify their weakness and strengths. As a result, the bakery will make changes to improve their financial performance. For instance, Babycakes bakery will adjust the areas where the estimations were not carried out (Caldwell, 2017). The sales budget indicates the products that are sold by the bakery in one day. It also includes the sales for three months of the bakery. Babycakes Bakery sold Bat Brownies at $5 each. The bakery received a net of $ 500 per day on selling Bat Brownies. Babycakes received a total of $ 15,000 in a month on selling Bat Brownies. The total sales per day were $ 2,500, and the bakery received $ 75,000 in a month. Thus, Bat Brownies had the highest sales out of the three products. Babycakes bakery sold the Pumpkin Bread at $ 10 a piece. The bakery received $ 250 in a day and $ 7,500 in a month on selling the Pumpkin Bread. The total sales in a day were $ 2,500, and the net monthly sales were $ 7,500. The bakery sold Snowman Cookies at $ 2 a piece. The bakery collected $ 2,000 in a day and $ 30,000 in a month on selling the Snowman Cookies. The total sales in a day were $ 2,000 and $ 60,000 in a month. Babycakes bakery received a total of $ 7,000 in a day and $ 142,500 in a month on selling the three new products. 

The owner of Babycakes bakery is interested in creating a flexible budget that can be used the business. The owner prefers the flexible over the static budget. The flexible budget will improve the performance of the bakery in different ways. Firstly, the flexible budget will assist the owner to avoid the past mistakes. Previously, the budget indicated an unfavorable variance in the sales. Budget planning is a difficult task for new business owners. Babycakes has been in the industry for some time and is opening a new store. It will be easier to make a budget plan for the bakery (Coveney & Cokins, 2014). The challenge that the bakery is likely to encounter is budget variations due to the different locations of the stores. 

Static budgets are planned before the commencement of the financial year. The static budgets contain small reporting periods such as quarters and months. The disadvantage of using the static budget for a new business is that the actual data to create the plan is inadequate (Bigelow, 2018). Babycakes bakery will have a sense of control over their activities through the creation of a flexible budget. The bakery will track its expenses where they can make real-time plans on adjusting the costs and revenue. The flexible budget will be sufficient at the new location because there is information on the previous costs of the New York’s bakery. The costs will be fixed to avoid other expenses from influencing the budgeted amount (Davoren, 2017). There will be variances in the budget amount due to the different locations of the bakeries. Babycakes might not meet the target due to the different environments of the bakeries. The variances are brought by the differences in the number of buyers in the two locations. 

The new bakery was overspending during the first few months. The expenses in the budget increased because the bakery spent cash on unnecessary items. Babycakes discovered that two employees were giving away the products to the consumers without their consent. Other employees were giving discounts that amounted to the full price of the products. An employee should uphold integrity when carrying out activities in the business. There is low trust when new employees or customers come to the company. Further, the customers do not trust the product of a new business. The new businesses have to convince customers about the efficiency of their products for them to make sales. Many temptations in the work environment force the employees to compromise. Some information can be omitted, and employees can violate rules when they compromise (Conner, 2013). The decisions of employees affect the financial performance of the company. Employees’ choices interfere with the budget of the company. 

There is a need for mitigating the factors that interfere with the budget. The owner of Babycakes bakery needs to provide training to the employees on the ways of carrying out business activities. Training is essential in imparting knowledge to the employees on the ways of treating customers in case they demand discounts or gifts. The employees will understand the consequences of compromising on the financial performance of the bakery. As a result, the employees will spend according to the budget. The other action is that the owner f the bakery can find employees who are disciplined and have acquired training on managing business operations. The employees can manage the new bakery appropriately because they are experienced. Thirdly, the owner of Babycakes can manage the operations of the new location for the employees to spend the allocated cash on their activities. The owner has experience in managing a business which can be easier to control the activities of the location. Through proper management, the expenses of the new location can reduce. 

In conclusion, budgetary planning is an essential activity in a company. It assists the company to spend according to the available amount. A sales budget assists a company in predicting their performance and making the necessary adjustments. A flexible budget gives a company an opportunity to make immediate adjustments that are aligned to the sales and revenues. New businesses should create a flexible budget for them to make changes that occur during their operations. 

References 

Bigelow, L. (2009). Static vs. Flexible Budgets for New Businesses. Retrieved from http://smallbusiness.chron.com/static-vs-flexible-budgets-new-businesses-20879.html 

Caldwell, M. (July 21 st , 2017). How To Budget Successfully . Retrieved from https://www.thebalance.com/how-to-budget-successfully-2385709 

Conner, C. (March 4 th , 2013). The ‘8’ Great Challenges Every Business Faces (And How To Master Them All). Retrieved from https://www.forbes.com/sites/unicefusa/2018/01/19/demanding-an-end-to-child-trafficking-and-forced-labor/#230af6dc4e19 

Coveney, M., & Cokins, G. (2014). Budgeting, planning, and forecasting in uncertain times . 

Davoren, J. (2017).  The Advantages of a Flexible Budget . Smallbusiness.chron.com. Retrieved from http://smallbusiness.chron.com/advantages-flexible-budget-57105.html 

Info Entrepreneurs, (2009). Budgeting and Business Planning. Retrieve from http://www.infoentrepreneurs.org/en/guides/budgeting-and-business-planning/ 

Nelson, R. (2005). Windy . Minneapolis: Lerner Publications Co. 

Wiley. (2011). Budgetary Planning featuring Babycakes [Video].