Organizational Budget and Investment Project Proposal


Organizational Budget and Investment Project Proposal

Word Count 1764


• An interpretation of organisational budgets in the given health and social care
• An evaluation of capital expenditures and investment projects using different investment appraisal techniques
• Recommendations for financial management in the given Health and Social Care organisations.

Additional information

Table of Contents

Organizational Budget
Investment Project Appraisal
Recommendations for Financial Management


Organizational Budget

The budget is a forecast of the organization’s future. It defines the future plans of the organization in a financial view. When planning the strategy and evaluating the current level of performance, a budget will help the organization. Given the importance of a budget, regardless of the type of organization or the type of industry or sector the organization, budgets are prepared. The same is applicable for the health and care organizations such as Anchor.
The budgeting process is a special process where all the annual strategies of Anchor is planned around. The organization follows an activity-based budgeting model, where each of the services the organization is planning to provide is considered on their revenue to be earned and the expenses which are incurred when generating those revenues are also preplanned. (Becker et al, 2016) As the organization’s main activity is providing health care services to the elders, the rates are budgeted, and the revenue is matched. However, if there are any deviations from the budget, the organization is either charging or disposing the additional impact to the customer. It is mentioned in their management analysis in the Annual Report. Due to this factor, it can be said that the organization is considering the budget as a performance monitoring mechanism to monitor the organizational performance.
Another crucial factor handled by a budget is its ability to manage the cash flow situation of the organization. The working capital needs of an organization should be catered at the correct time in order to achieve the operational excellency. (Becker et al, 2016) In a health care services provider such as Anchor, this will be vital since the customers are expecting this from the organization. Thus, the management will have to plan ahead the capital requirements correctly and find proper methods of financing to support those requirements. The budgeting process is the main process which supports this activity by forecasting future targets and conditions and by accessing the collections, is checking the actual capital requirements.
Further since the concept of liquidity and profitability are negatively correlated, it would be vital for an organization to have the correct level of liquidity to ensure the maximum profitability. The budgeting process will help this activity as well.
Budgeting process will be a time-consuming process which will be extensive and costly. However, the benefits generated as a return is overcoming that cost, where budgeting is encouraged within organizations. Overall, in Anchor, the organization culture itself is formed around the budgeting where the management try to stick with the budgets despite the external changes. Following the budget closely have its own benefits as well as cons. The main con is that a budget is a fixed strategy. In a rapidly changing environment, following up a fixed budget will not only be realistic, but also will divert the corporate strategy from what is planned.