Budgeting process: a case of SIX12 Limited

 Background information

Established in 2012, SIX12TM Investments Nigeria Limited is a powerful brand in the Nigerian beverage industry. Since its inception, the company has taken a significant share of the Nigerian beverage industry’s market share with its advanced innovations. Presently, it is the only brand offering natural apple cider in the country.

Its corporate values are embodied in the company’s mission of providing Nigerians with quality and natural beverages as opposed to the artificial ones readily available in the market (SIX12TM Official Website, n.d.). Presently, I work as a business development officer in this company, and my decision to choose it for my assignment is because I am familiar with all aspects and operation processes at SIX12TM Investments Nigeria Limited.

The budgeting process in SIX12TM

When it comes to budgeting in SIX12TM, six steps are involved, as follows:

• Write it down. The business budget is written down in terms of what the company aims to achieve and how it intends to go about it, as well as the resources allocated for each stage and operation.
• Decide on parties to be involved. Once the budget has been written down, the next stage is to decide on who should be involved in both evaluation and execution.
• Establish an annualized timeline: timelines are set for delivery of set budget targets as well as annual meetings to evaluate overall success.
• Establish specific tasks with specific responsibilities: The company also assigns specific tasks and responsibilities to those involved in budget execution, making them directly answerable on related questions.
• Sync budget and accounting items together. One thing that does determine the success of any given budget is how it is synced with the accounting of the company, and SIX12TM does ensure that such is the case when it comes to budgeting in the company.
• Develop tools for contingencies: "what ifs" can arise in businesses and budgets as a result of inconsistencies in the business environment, and my company does ensure that the right tools are developed to tackle such contingencies as they arise.

Basically, the process of budgeting in SIX12TM involves understanding what the company aims to achieve, allocating capital to guarantee success, and monitoring the whole process to ensure that desired outcomes are achievable at the end of the budgeted time.

Management accounting system (MAS) in SIX12TM

SIX12TM relies heavily on information management as it strives to maintain market sustainability and compete against well-established brands.Thus, when it comes to the management accounting system, information is gathered from all stakeholders and then disseminated to the right channels in the company for an effective production process.

• Information gathering: the company conducts a number of market studies every six months to gather information on consumers’ tastes and market pricing. Also, information is gathered from suppliers as necessary. The company also monitors other aspects of the market, such as the cost of commodities, fuel, etc. These data are gathered both manually and electronically, but they are all computed and analyzed with the aid of statistical tools like SPSS to determine market changes and adjust their approach.
• Information process: As previously stated, we process information with the aid of statistical tools like SPSS, and the results are then studied to understand changes in the market and how such changes can be addressed (e.g., by adopting more reliable and cheaper suppliers, or by increasing price slightly to be more competitive, etc.).
• Information dissemination: information is shared with the right department, but all departments work in a network. For instance, the purchase department informs the production department on the availability of raw materials, the marketing department informs production on market demand and expected production units, the accounting department issues capital as necessary to maintain an efficient production process in all departments, etc.
• Management accounting system—we make use of numerous software programs when it comes to the MAS. The most prominent are SPSS, Python, Payroll, Order and Delivery Tools, etc. The internal management stored all information in these systems and analyzed them to determine how to effectively manage the company. These tools have effectively improved the management process and enhanced overall product delivery speed in the company.

SIX12TM costing procedure

The company adopts the activity-based costing method. This is because there are no fixed costs in SIX1TM, and costs are incurred in response to changes in demand and production.For instance, the greater the demand for our products, the higher the production costs and incurred expenses, and vice versa.

Capital decision-making process in SIX12TM

These are the steps adopted in the capital decision process of the company:

• Identification of a project
• Definition of a project and screening
• Analyzing and accepting
• Implementation
• Monitoring
• Post audit

However, capital, just like costs, is allocated based on relevance with respect to expected outcomes. If a project is deemed capable of returning huge profits in the short run, more capital will be allocated to it, and vice versa.

Capital acquisition

The company adopts a more short-term capital structure. This implies that it is more likely to acquire capital that will return expected incentives within a short period of time. Being in such a competitive market, this is the only way to guarantee success, as the more the company can reinvest within a short period of time, the more it can increase its chances of continued and sustainable maximization of profit.

References

Six12TM Official Website (n.d.) About us. Available at: http://mysix12.com/about.html [Accessed 22 April 2015].