- April 26, 2020
CASH BUDGET 1
Several elements can cause uncertainty in the cash budget for anenterprise. For example, the level of market competition cannot beadequately measured. Most industries allow free entry and exit offirms. Hence, new competitors may charge low prices to appeal to themarket. In many instances, an entity cannot predict the level ofsales with certainty. Therefore, it makes it difficult to create abudget without knowing the probable amount of expected revenues(Abor, 2016). Furthermore, consumer tastes and preferences changeover time. The products and services offered by an enterprise mayhave only temporary appeal. In the long-run, consumers may changetheir preferences. Therefore, a company would face uncertainty whentrying to predict the amount of sales.
As the Chief Financial Officer, I would ensure that the company doesregular market research to identify new competitors. In-depthanalysis should also be done to outline the types of products andservices offered by other firms in the market. The company must alsomake comparisons of the prices at which entities provide goods andservices. In this regard, the firm will be prepared to implementcost-cutting measures to become more competitive (Abor, 2016).Besides, I would conduct consumer outreach initiatives designed toidentify the changing needs of consumers. Emails should be sent toregular customers soliciting for feedback on the company’s productsand services. In a large firm of over 1000 employees, uncertaintiesin the cash budget would necessitate a review of job tasks. In thisrespect, human resource officers would be required to evaluatewhether some workers could be terminated to reduce the wage bill.However, in a smaller company with hundreds of employees, uncertaintyin the cash budget would lead to sole focus on increasing revenue.
Indeed, stiff competition and changes in consumer tastes andpreferences can cause uncertainty in the cash budget. However, themanager can implement market research designed to study otherbusinesses in the industry. Such research will also identify trendsin the tastes of consumers.
Abor, J. Y. (2016). Financial Planning and Forecasting. InEntrepreneurial Finance for MSMEs (pp. 199-224). New York, NY:Springer International Publishing.