Budgeting process and procedures in Coca-Cola

Author: Iloka Benneth Chiemelie

Published: 15th of December 2014

1. Name of company

Coca-Cola

2. Budgeting process and procedures for Coca-Cola

2.1 Preparation techniques – in accordance with Coca-Cola’s form 10k annual report, budgeting (both financial and non-financial) is goal driven (Coca-Cola, 2012). The implication is that the company determine the budget based on their desired and set objectives, thus prepare budgets in such a way that these objectives can be achieved at the end of the day.

2.2 Uses for evaluation – the company makes use of the budget both for internal and external evaluation. As detailed in their annual report, a clear analysis is presented on the brand’s overall performance with respect to what they obtained at the end of the year as compared with what they planned to obtain from the beginning of the year.

2.3 Differences between business units/divisions

Being a multinational brand, Coca-Cola has numerous business units and department that undertake different functions in the course of meeting its set objectives. Thus, analyzing the performance of these departments and comparing them together with that of other departments is without much doubt a necessity. The company goes about this function by setting targets for each department and then comparing these targets with the outcome produces by these departments. Thus, the company can then make use of such evaluations to compare between departments in terms of their overall delivery of set objectives.

3. Management accounting system in Coca-Cola

Phil (1999) present a clear analysis of management accounting in Coca-Cola, in which he made known that the process gathering accounting information in the company starts with documents all the purchase and sales related activities. The company has a system that it used to record what it purchase in the course of producing any given product as well as the revenue generated from the sales of such product. Besides internal information, it was also made known by Phil (1999) that the company normally conducts surveys with their consumers to understand their overall view on products and needed improvements. These gained understanding are used to define the management process and it influences decision making process in the company.

4. Costing methods in Coca-Cola

Coca-Cola activity based costing measures in which the actual cost incurred can be influence by the activities undertaken in the course of producing a given product. Considering the fact that the company maintains operations in numerous countries, it can easily be understood as noted by Phil (1999) similar activities can come with different prices in different countries, thus calling on the need for the company to be flexible in determining its costing measures. Thus, ABC is the costing approach most famously used in Coca-Cola (Phil, 1999).

5. Capital decisions making process in Coca-Cola

Just as in any given company, capital decision making is very important in Coca-Cola and it can even be considered more important to the brand because investments are normally huge, which means that risks can be very. From the company’s annual return, it can be seen that a number of capital decisions making process are adopted in the course of budgeting within the company. First of such is the payback period in which Coca-Cola always calculates its investment returns period to determine whether the expected period for returns are favorable or not. Net present value and internal rate of returns are also employed by the company in investment decisions process to understand the actual value expected from such investment and the amount of investment that must be made in order to obtain the expected value.

6. Decision making criteria for acquiring new investments in Coca-Cola

In the course of deciding whether or not to acquire a given investment, analyzes the investment based on the following decisions:

6.1 Impact on brand image – Coca-Cola is always watchful of its brand image and investment decision must meet the criteria set in the view of such investment not having any negative impact on brand image. For instance, the company doesn’t invest in troubled government system or systems found to be corrupt in order to limit being viewed with the same image.

6.2 Expected returns – the higher the expected return from any given investment, the higher the chances of Coca-Cola investing as one of their criteria is that any given investment must be capable of returning positive results.

Reference

Coca-Cola (2012), “Annual return.” Available at: http://www.coca-colacompany.com/annual-review/2012/pdf/form_10K_2012.pdf

Phil,W (1995), “ Accounting at Coke and Coke’s bootling woes.” Available at: http://www.public.asu.edu/~bac524/accounting_at_coke_and_cokes_bottling_woes.pdf