Budgetary Plan- Flex Gym Business

Budgetary Plan- Flex Gym Business

The information in this paper is related to research and development of a budget for a planned project. The project relates to opening a new gym business in the local town. The gym will be branded Flex Gym and will seek to serve the interests of people living in the town who need physical fitness and who would like to live a healthy, exercising life. The paper creates a budget for the new business to be opened to help achieve the primary objectives of a budget that includes proper management of financial resources. Developing a budget for the business is crucial in ensuring that the business expenditure matches the primary objectives of establishing the business. Specifically, the report creates two budgets: the cash budget and the sales and administrative expenses budget. The first budget pays attention to raising and spending cash, while the second one monitors the costs to be incurred in running the business. Consistently, various costs classified under fixed expenses and variable expenses are covered in the second budget. The budgets are based on a specific period, which is the new business’s first fiscal period of operation. The preparation of the two budgets scores the importance of business planning and how control of company spending can be achieved through budgetary controls. Budget controls for the intended business and an internal control mechanism are established to make the budget planning and preparation process more efficient. Towards the end, recommendations are made regarding the use of budgeting as a tool to control costs within an organization.

 Introduction

The paper creates a budget for the new business to be opened to help achieve the primary objectives of a budget that includes proper management of financial resources. Specifically, the report creates two budgets: the cash budget and the sales and administrative expenses budget. The first budget pays attention to raising and spending cash, while the second monitors the costs to be incurred in running the business. The budgets are based on a specific period, which is the new business’s first fiscal period of operation. The preparation of the two budgets scores the importance of business planning and how control of company spending can be achieved through budgetary controls. The flow of the paper entails discussing the company or business to open in the local town, budget planning, budget samples, budget controls, and a conclusion before making recommendations.

Company Overview

The intended business will be branded Flex Gym Business. It will entail a sole proprietor business offering general fitness services within the local town. The opening of the business is influenced by the discovery that there is a low number of physical fitness centers within the town amid a continued growth in the number of people seeking such facilities for physical fitness. Since the form of the business will be that of a sole proprietor, I will be in charge of all the business affairs, including seeking funds to start the business and running it from one day to another. Selecting this form of business was influenced by several variables. First, the business form is simple to open and operate, considering the legal compliance measures required and the costs of starting up the business (Olazabal & Avila, 2022). Furthermore, establishing the company as the sole proprietor will give me complete decision-making authority over the enterprise, with no profit-sharing involved.

The business will offer physical fitness services to customers from around the local town. The demand for the services has grown tremendously due to the increase in the number of people living in the local town. Furthermore, people’s awareness of their health and physical exercise has grown, and they are making every effort to live a healthy lifestyle (León-Quismondo et al., 2020). As a result, the Flex Gym will fulfill their interests and assist them in leading healthy lives that include staying disease-free. The company will establish itself as a physically accessible new location in the town. However, its presence will be made available online through social media. Lastly, Flex Gym will employ five people to help run its affairs. The five will include two trainers, one secretary, the financial officer, and one general manager, a position that I will hold.

Budget Planning

Overview

This section’s primary focus is on the Flex Gym business’s budget planning process. According to Arnold & Artz (2019), a three-step strategic planning process known as “budget planning” is used to identify and specify a business’s long- and short-term financial objectives. The chief financial officer often provides direction to the finance department of a corporation, which oversees the process. Planning, budgeting, and forecasting are the three phases. Usually, the first step in starting a business is planning. Planning develops a model of expectations for the next three to five years and describes the financial direction of the organization.

Consequently, the monthly execution of the strategy is documented through budgeting. It usually contains projections for projected cash flow, debt reduction, and income and spending predictions. Budgets are often created by businesses at the start of the fiscal or calendar year, with flexibility allowed for when revenues increase or decrease (Milewski & Tomasiewicz, 2019). The differences or inaccuracies between the budget and actual financial accounts are computed by comparing the two. On the other hand, forecasting projects financial results for the next months or years based on a combination of market circumstances and collected historical data. Forecasts, which are intended to assist management teams in projecting outcomes based on historical data, can be modified in response to new information. In contrast to budgeting, financial forecasting does not analyze the difference between projected and actual performance.

People Involved in Budgeting

Three people will undertake the actual budget planning process for the Flex Gym business venture. The three will include the general manager, the financial officer, and the secretary. In preparing the budget, the general manager will be involved in ensuring that the budget serves the interest of opening the business. Therefore, the general manager will bring the aspect of strategy to the overall budgeting process (Hill, 2022). On the other hand, the financial officer will be involved in the budgeting process because he will have the best financial background required to run the business (Kaawaase et al., 2021). Notably, the financial officer will prepare and dictate the business’s financial matters under the general manager’s approval. The secretary will be involved in the budgeting process to help document the resolutions taken regarding the preparation and implementation of budget planning. Further, the secretary requires a brief background on the cost expenditure of the business because, at most times, the secretary will be the one operating the office daily.

Notably, the preparation of financial budgets will require several inputs for successful planning. First, the average market costs for the standard gym equipment will be required. Which will provide the budgeting team with the material costs required for running the gym. Second, the costs associated with operating and maintaining the gym equipment will be required. The costs will be obtained through a market survey of the already established gym businesses in the town. Third, the salaries for all employees to be employed in the business will be required. Hence, obtaining the standard payment rate will be based on regulatory requirements for wages that are set by the local government. Further, additional incentives for the payment of employees will be accounted for based on the experience and qualifications of the staff. Third, general administrative and selling expense projections will be required as input to the budgetary process. Notably, this will include costs such as rent, electricity bills, and water bills.

For the correct estimation of the mentioned cost projections, the business will acquire the consultancy services of a gym expert. The individual will be able to estimate the costs efficiently for our new business. For instance, the consultant will advise us on the best equipment to acquire and at what price. Further, the consultant will advise on the general gym cost management to set the business on a proper footing before commencing business operations.

Budget Samples

Cash Budget

The cash budget and selling and administrative expenses budget are given above. For the cash budget, money will flow into the company through three channels. The three include membership fees, personal training services, and classes and workshops. The elaborate budget shows the income for each of these aspects for the entire year by covering 12 months. A summarized budget that covers the totals for the entire year is provided for simplicity purposes. The numbers given in the budget are based on industry research and accepted general standards. Thus, they are reasonable and applicable to the intended business venture. Starting with the cash budget, the subscription fee for gyms around the local town averages 20 dollars per person, hence the adoption of the rate. The same applies to personal training services classes and workshops. However, the same cannot be said for the selling and administrative budget, as given in the next section. The selling and administrative expenses budget estimations vary based on the qualifications of people to be hired and the market rates for such positions. For the proposed business, there will be rent and utilities expenses, salaries and wages, marketing and advertising, and maintenance and repair costs under the selling and administrative expenses. The estimation of figures is based on industry averages for a normal gym business within the locality.

Budget Controls

The proposed business will remain within the forecasted budget in terms of operations by taking into account various aspects. First, expenditures will be monitored continuously to ensure costs are spent within reasonable limits. Notably, this will be done every month by calculating budgetary variances and determining whether they are favorable or unfavorable. The variance analysis will assist in ensuring that areas where attention is required are identified early and appropriate measures taken. If significant variances are identified, measures to adjust the budget can be taken. The measures can be taken by implementing a policy that will allow a supplementary budget that will accommodate rising costs. According to Adilli (2020), budgetary variance analysis and the creation of supplementary budgets should not be a way of correcting errors that are made in the budgeting process. Therefore, a supplementary budget will be done for only costs arising from unforeseen events such as epidemics and shifts in critical industry aspects such as interest rates.

Consequently, the company’s financial officer will play the greatest role in controlling the budgeting activities. The financial officer will calculate the budgeting variances monthly and share them with the general for discussion. Other employees can be invited if the financial officer and the general manager deem it appropriate for them to contribute to corrective measures to address unfavorable variances. For instance, gym trainers can occasionally be called to offer suggestions regarding training activities and whether customers will be willing to adjust the amount they pay for the services. However, it is important to note that budgeting should not be based on decisions made by those tasked to make decisions within the enterprise. It should also consider best practices from the industry and maintain high levels of ethics (Miller et al., 2019). For example, the fact that a customer may be willing to pay extra for gym services should not be the basis for overcharging them. Thus, the actions taken under the whole budgeting process should be reasonable and fall within accepted industry standards.

Conclusion/Recommendations

The budgeting process for the intended Flex Gym is a worthwhile endeavor. Notably, it allows the business to manage costs strictly and prudently. Furthermore, it allows the business to stay within the required industry standards. From the discussion above, the company will serve a genuine societal need of offering the increasingly wanted physical fitness for well-being. The discussion pays attention to budgeting as a crucial aspect of attaining success for the business’s activities. Budget planning entails estimating expenditure for a given fiscal period. A cash budget and selling and administrative budgets are prepared and presented for the intended Flex Gym Business. The budgets indicate that the business will remain profitable throughout the year given a normal situation within the industry in the local town. However, if things fail to go as planned, a contingency measure that is subject to discussion between the business management is allowed, including the implementation of a supplementary budget. It is recommended that the business strictly operates within the budgeted limits to attain success in the long run. For other students who will encounter budgeting, it is recommended that they practice budgeting even for the primary expenses as a basis for appreciating the importance of the budgeting process. It is also recommended that apart from the cash budget and selling and administrative budget, there is a need to master all kinds of budgets to fully comprehend budgetary planning. Irrespective of the nature of a business venture that one may stay in, a budget can be adopted as an internal control to ensure that the business operates within the required standards.

References

Adilli, A. (2020). The Flexible Budget as a Development Tool: Evidence From the Personal Preparation Course. Available at SSRN 3539720.

Arnold, M., & Artz, M. (2019). The use of a single budget or separate budgets for planning and performance evaluation. Accounting, organizations and society, 73, 50-67.

Hill, C. W. (2022). Essentials of strategic management. Cengage Learning.

Kaawaase, T. K., Nairuba, C., Akankunda, B., & Bananuka, J. (2021). Corporate governance, Internal audit quality, and financial reporting quality of financial institutions. Asian  Journal of Accounting Research, 6(3), 348-366.

León-Quismondo, J., García-Unanue, J., & Burillo, P. (2020). Best practices for fitness center Business sustainability: A qualitative vision. Sustainability, 12(12), 5067.

Milewski, R., & Tomasiewicz, M. (2019). Model of performance-based budget planning in Public sector entities. Scientific Journal of the Military University of Land Forces, 51.

Miller, S. A., Hildreth, R. W., & Stewart, L. M. (2019). The modes of participation: A revised Frame for identifying and analyzing participatory budgeting practices. Administration &  Society, 51(8), 1254-1281.

Olazabal, V. H. N., & Avila, N. M. G. (2022). Dynamic capabilities in sole proprietorships: Theoretical model through grounded theory. Journal of International   Entrepreneurship, 20(4), 591-618.a:link {text-decoration: none;}a:visited {text-decoration: none;
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You will create a Budgetary Plan for a gym (Flex Gym). You will provide a very brief overview of your company, and your ideas on budget planning and controls along with 2 sample budgets (Cash and Selling and Administrative) prepared using Excel.

Budgetary Plan- Flex Gym Business

Write an 8-page paper (not counting the cover page, abstract, reference page, or attachments) using the template provided as a guide and no more than 10 pages.
Attach your Excel examples as Attachments to your paper
Use proper APA format on citations and references
Minimum of 8 scholarly sources