Introduction
The Situation: A Meeting at the Company
Girish (President)
- Praised the company’s performance — new customers, near full capacity, overtime production.
- Called the meeting to address financial warning signs raised by CFO.
Marketing Success
Noothan (Marketing Head)
- Acknowledged marketing success and high product quality.
- Mentioned customers shifted from a leading competitor due to a strike.
- Believes the coming year is promising.
Production Constraints
Prabhu (Production Head)
- Warned of overstretched operations and equipment breakdown risks.
- Critical equipment replacement and service requests pending with Finance.
- Further production increase needs more machines and manpower.
HR Concerns
Pooja (HR Head)
- Competitors are attracting workers with better pay and facilities.
- Difficult to hire skilled labor.
- Suggested 20% salary hike to retain staff.
Financial Reality Check
Souravi (CFO)
- Topline growth isn’t translating into profits.
- Increased credit period to customers from 30 to 90 days — poor collections.
- High promotional expenses and wafer-thin margins.
- Warned of cash flow crisis — salaries delayed, possible breakdown in 3 months.
- Budget planning failed because:
- Forecast was wrong (planned for 52% utilization, hit nearly 100%)
- Special approvals ignored budget
- Discounts, liberal credit, high promotions not budgeted
✅ President's Response
Girish
- Acknowledged the issue.
- Returned the new budget proposal for revision.
- No more special approvals outside budget.
- Will speak to banks and investors for expansion funding.
- Emphasized focus on:
- Growth
- Profit
- Cash Flow
- Suggested scenario-based budgets.
Learning: What is Budgeting?
Budgeting = Planning + Resource Allocation
Budgeting helps organizations:
- Forecast future income & expenses
- Allocate resources
- Plan for deficits or adjust plans
- Coordinate across departments
Budgeting in Everyday Life
Examples:
- Family budgets before festivals
- Students plan for college events
- Government prepares and presents the Union Budget
Common Goals:
- List planned expenses
- Ensure resources match needs
- Adjust when resources fall short
Budgeting in Business: Why It’s Crucial
Without budgets:
- Departments work in silos
- Emergency purchases and overtime increase costs
- Creates organizational chaos
Budgets Ensure:
- Clear targets
- Coordination between departments
- Cost control and financial discipline