The purpose of this report is to produce a resource management plan for an organisation, the aim of resource planning is to identify the resources that are available to complete a task or project and this might be can include anything from human resources, physical resources and financial resources. Furthermore, to explain cost associated with the use of the resources and evaluation of how budgeting is used to plan, monitor and control resources in the selected organisation. For this report, River Island has been selected. Page Break 2.0 Company Background River Island is a fashion high-street retailer-brand, it was founded in 1948, London by Bernard Lewis and his siblings. The company is privately owned by the Lewis family and offers products and services ranging from men’s wear, women’s wear children’s wear as well as footwear and accessories. River Island operates worldwide and has over 350 stores in the UK, Ireland and Internationally throughout Asia, The Middle East and Europe and online sites operating in four currencies. Page Break 3.0 Resource Management Planning “A resource management plan comprises the acquisition and deployment of internal and external required to deliver a project or programme”. The purpose of resource management planning enables the project manager to identify all of the resources required to complete a project, the costs and any risks or other variables associated with the project. “The plan isn’t a static document as resource needs and risk changes as a project unfolds, therefore project managers rely on the resource management plan to re-allocate resources in a matter of seconds, preview the impacts of their team’s resource load before implementing changes and bring the team together so everyone gets a clear in-context picture of where the project is today and where it’s headed to in the future”. A resource plan summarizes the exact quantities in labour, equipment and raw material, human resources and facilities needed to deliver a project through scheduling. Furthermore, the cost associated with a particular resource may vary depending on time and period when the resources are used. A resource planning will enable the project manager to identify the following: The total of people required to fill each role The types and quantities of equipment needed and its purpose Types of labour needed to complete the project Key and roles responsibilities for each labour type The total amount of materials Cost Estimation “Cost estimate is used to predict the quantity, cost and price of the resources required are going to cost by the project manager”(Cleopatra enterprise, 2017). Cost estimates are broken down into two categories: direct or indirect cost and fixed or variable overhead cost. Direct cost is cost which can be specifically traced directly to a cost object. This might be: Salaries or wages Materials or direct materials Labour Equipment Indirect cost is defined as a cost that is not direct attributable to cost objects. This might be: Electricity Security Administration cost Selling and distribution cost Fixed cost are expenses that does not change as the volume of production changes with an increase or decrease in the amount of output a business produces, these costs remain the same. Fixed cost often includes rent, salaries and insurance. Variable cost is expenses that vary with the amount of business activity and output, variable cost increases or decreases depending on the business’s production volume. Variable cost includes utilities, direct labour and direct materials. Below is an example of a graph of the fixed and variable costs. Budget “Time and money are scarce resources to all individuals and organizations; the efficient and effective use of these resources requires planning. Planning alone, however, is insufficient. Control is also necessary to ensure that plans actually are carried out. A budget is a tool that managers use to plan and control the use of scarce resources. A budget is a plan showing the company’s objectives and how management intends to acquire and use resources to attain those objectives” (Managerial accounting, 2017). Budgeting and cost control of resources involves the estimation of cost, setting a fixed budget, managing, monitoring and controlling the actual cost (compared to the estimated ones). It serves as a starting point against which the actual expenditure and predicted the ultimate cost. Below is an example of the difference between the budget, actual and predicted spend. Activities Involved in Project Management Planning “is the ability or function of the management process in anticipating the future with regards to resources available, time and the goals and objectives of an organization”. Organizing “is a systematic process of structuring, integrating, coordinating task goals, and activities to resources in order to attain objectives”. Commanding “is giving instructions to subordinates to carry out a task”. Coordinating “is determining the timing and sequencing of activities so that they mesh properly, allocating the appropriate proportions of resources, times and priority, and adapting means to ends”. Controlling “is checking that everything occurs according to the plan adopted, the principles established and the instructions issued”. Henri Fayol’s 5 functions of management Page Break 4.0 Cost associated with the use of resources Materials Materials Goods for resale Equipements Cash registers – point of sales systems Racks Shelves Mannequins Hangers Lifts or escalators Mirrors Bags Receipt papers Shopping baskets Labor In-house – store employees Outsourced – Garment workers Other expenses Store rent Electricity CCTV – security system License permits Suppliers The table above is showing the resources available for the operation in River Island. Direct cost is the amount River-Island has to pay directly for a resource, this include the consist of raw materials, direct materials that are needed to manufacture the products, equipment used for operation on a day to day basis of the company, wages/salaries of the workers producing the products and the employees who participate directly in sales, such as floor sales clerks and cashiers, payroll taxes, employee’s benefits, bonus and compensations are direct cost for River-island. An indirect cost are expenses includes activities that are not directly related to the products or services that River-Island offers, but they support the organisation’s profit-making activities. Indirect costs in River-island includes both fixed and variable costs such as the rent of the building in which River-island operates in, advertising, electricity, security system (CCTV), building maintenance, taxes, accounting, IT and, distribution and sales. Page Break5.0 Resource Plan “A Budgeting and financial forecasting are financial planning techniques that help the company in the decision-making process. Budgeting uses estimation to quantify the expectation of revenues the business wants to achieve for a future period, whereas financial forecasting is used to estimate the number of revenues that will be achieved. Budgeting essentially lays out a plan for where the company wants to go, whereas financial forecasting indicates where the company is actually headed. A budget estimates the total of revenues and expenses a company may sustain over a future period. Budgeting represents company’s financial position, cash flows and objectives. The company’s budget is usually re-evaluated periodically, month to month per fiscal year. Budgeting creates a baseline to compare actual results to determine how the results vary from the expected performance. Companies use financial forecasting to determine how they should allocate their budgets for a future period” (Investopedia, 2018). The cash flow budget and forecast plan is an outline of expected expenses over a duration of time in the company, financial processes important to both short- and long-term success. The business cash flow budget will verify that they have the required financial resources to achieve the company’s objectives. A cash flow budget displays the company’s monthly financial requirement. Plan – layouts the business’s financial expectations and direction for the next 12 months Budget- reports how the overall plan will be executed monthly throughout the year, specifying expenditures. Forecast – uses past and present data to predict financial outcomes for future months or years. Jan Feb March April May June July Inflows Unit Sales 15,000 14,000 13,500 13,900 14,000 13,600 14,000 Bank Loan 70,000 Outflows Equipment 1,500 1,500 1,500 1,500 1,500 1,500 1,500 Materials 3,000 3,000 3000 3,000 3,000 3,000 3,000 Labour 6,100 6,100 6,100 6,100 6,100 6,100 6,100 Supplies 2,000 2,000 2,000 2,000 2,000 2,000 2,000 Adverts 100 100 100 100 100 100 100 Rent 550 550 550 550 550 550 550 Other 225 225 225 225 225 225 225 Loan repays 5,833 5,833 5,833 5,833 5,833 5,833 5,833 Aug Sept Oct Nov Dec Total Inflow Unit sales 16,000 14,500 14,900 14,000 15,600 173,000 Bank Loan 70,000 Outflows Equipment 1,500 1,500 1,500 1,500 1,500 18,000 Materials 3,000 3,000 3,000 3,000 3,000 37,000 Labour 6,100 6,100 6,100 6,100 6,100 73,000 Supplies 2,000 2,000 2,000 2,000 2,000 24,000 Adverts 100 100 100 100 100 1,200 Rent 550 550 550 550 550 6,600 Other 225 225 225 225 225 2,700 Loan repays 5,833 5,833 5,833 5,833 5,833 70,000 Page Break6.0 Evaluation of Budgeting Plan Budget setting in River island is by reviewing and examining past period’s revenues and creating alteration for the upcoming year and what changes will occur over the next year. The budget plan summarises the earnings and spending habits on each month so that they have a clear idea of where the cash is going and avoid overspending or overbudgeting. Monitor The budget-monitoring process in River-island ensures actual activity to planned activity and control their expenditure to ensure that it is within overall resource allocations, this ensures the efficient and effective use of resources for their planned purposes and are properly accounted for. Monitoring the budget monthly from January throughout to December is done to help identify potential opportunities or problems by taking corrective action to tackle any significant variances when they are predicted early. ensure that, at the end of the financial year, actual spending Control Planning and monitoring the budget in River-island help them measure the actual performance against budgeted performance, by controlling the budget helps to reduce wasteful expenditures and adapt/adjust financial situation quickly. Example if there is an over-spent on a budget in the month of June and there is underspend in the month of March, this gives the company the opportunity to identify alternative sources of income/funds that could be used to cover the over-spend either by the taking underspent budget in March to cover the overspent budget in June. Improving “A key aspect of good financial planning is to compare actual resources used in a given financial year against the plans made for that year. A budget is a plan of what a department aims to achieve in a planning period and can, therefore, be used to judge actual performance. For accurate and efficient budget and cash flow processes are important tools for achieving targets. The budget process should be customized to support the company should be designed to organize spending plans that cost out the resource needs to support the implementation of the strategic plan. There should also be a strong linkage between budget allocations and performance measures so an organization is funding programs and services that provide the best opportunity to meet goals. These changes, even at the smallest level, can lead to more accurate data analysis and better decision making over the long run for the company”. Page Break 7.0 Recommendation and Conclusion “In River-island, risk management, cash flow, decision making, sales and human resources all depend on budgeting and planning processes for River-island to improve the budgeting process is by classifying the expenses into overhead and production categories, this will help the company set the prices and make decisions when they need to cut cost”. In conclusion, a budget is a tool that is designed to evolve and improve as the needs of organisations changes, it is developing rather than becoming obsolete. Whilst it has changed slightly leading to some incremental improvements, the classic budgets are now complemented with new techniques and tools. Due to the continuously changing surroundings in which most business operates, forecasting is now a fundamental tool to control such changes.