Contingency Plan & Its Implementation â€Free Samples For Students

Question: Discuss About The Contingency Plan And Its Implementation? Answer: Introducation Being the Senior Accountant of Big Red Bicycle Pty Ltd., as per the analysis of budget variance report, the following conclusions have been drawn : There is an irregularity in the company as the gross profit ratio is negative in three quarters while it is positive in third quarter (Berman, Knight and Case, 2013). The net profit variance is more than the half in the first quarter but shows a reduction of 31.88% which is still negative and suddenly shows a good % in third quarter, i.e.,52.92% but drastically decreases in the fourth quarter shoeing a negative variance % of 49.84%. Though the income and expenses cannot be accurately determined while preparing budgets, however, it shows an approximate values and 10% fall or excess is acceptable. However, such variations in net profit shows that the problem exists in the internal environment of the company as positive results are being observed in the third quarter but high negative percentages in other quarters along with the fact that variances in expenses are not more than 5% whether positive or negative (Bragg, 2014). After a clear analysis of the internal environment, following observations, that acts as the major problems for such negative results, were made : The major problems lies with the employees working under the company. The employees aren't loyal enough to their jobs leading to unnecessary idle time as well as distraction from their commitment as done in the contract (Brigham and Ehrhardt, 2017). The employees responsible for looking after the basic raw materials necessities just overlooked the wastage of water, materials, electricity, etc. The sale team members were happy about the incentive programs and worked hard in the third quarter. However, due to threatening tone of emails lose their morale and became casual about their jobs and the results of such lost interest could be reflected well in the fourth quarter when compared with the third quarter (Gitman and Zutter, 2012). The training orientations were useful to some but made no difference as such to the entire personnel. The 50% of fixed direct wages were of the short term contracts employees where the contracts have already expired the employees no longer exists. The employees weren't really active and it may be because they didn't feel good about the company's policies and therefore, felt being not a part of business decisions but just mere workers who are to just follow the instructions of the top management. The above stated problems are clearly related to the personnel of the company because of which the company is facing such problems. Employees are the most important assets of the company as without a proper team, no business can prosper. Therefore, a revised contingency plan and a contingency implementation plan is required to be formulated. The contingency plan consists of the activities/strategies to be adopted so as to minimize the risk and reduce the variations as well as steps towards the targeted goals. The targets of the company could be well specified along with the steps to be implemented so as to fulfill such targets : As the economic conditions are going to deteriorate, the sales volume are expected to fall down by 20%. The company can accept a maximum of 10% variations in profits and therefore, a quarterly variation report is to be made to analyze the expenses and income and shortfall of profit variations over 10% so as to formulate required actions to be taken. The implementation of effective training orientation classes so as to boost the confidence and morale values of the employees and instill a feeling of dedication towards their jobs. For this, certain incentives programs are to be established too so as to reward the true efforts and motivate the other employees. Such training classes would be mandatory for the entire personnel to attend as a new approach would be adopted to conduct training processes (Garrison, Noreen and Brewer, 2012). Where the management will take such positive steps to encourage the staffing team, on the same hand, it would also implement certain strict actions as stated below It would make warning calls emails to employees that they may not take their fixed wages for granted and therefore, act resentful as and when they wish. Such behaviour would lead to losing of the job at one shot. The employees are not going to be allowed overtime period as such policies makes them casual and thereby, not completing the targets on time. Therefore, the company's ultimate demand from employees is hard-work, loyalty deduction towards the company's goals as that would be benefitting them only later on (Hoyle, Schaefer and Doupnik, 2015). The management would also be asking for employees suggestions and observation reports on a time-to-time basis so as to give them a feeling of belongingness and also, what lower management faces is often overlooked unintentionally by the top management (Ehrhardt and Brigham, 2011). Therefore, it would be a good practice to analyze the issues and the internal environment as a whole. The company would be announcing an increment in commission from 2% to 2.5% so as to encourage sale team members to make more sales in the market as already, the company is expecting a downfall of 20% in its sales volume. Therefore, to control the downfall, it has to encourage its sales members. To compensate for the poor performance of one product, the company is also targeting towards diversifying its range of products so as to improve the performance of the company. Also, the company is thinking of considering the manufacturing overseas so as to take an advantage of reduced costs (Cafferky, 2014). The key to success is the team members working behind to achieve such goals. Therfore, the company, targeting towards success has to first start from itself, i.e.,its internal environment whether it is effective in nature or not and then, jump onto the external markets. The variances in profits could be well visualized from the budget reports and the market conditions, together calls for an urgent requirement of a contingency plan to be implemented so as to save the company from suffering such adverse effects and obligations in the future period of time. The company is set to implement the above stated plans and is looking forward to improve its results and make enough profits as per their set targets. References Berman, K., Knight, J. and Case, J. (2013). Financial intelligence. 1st ed. Boston, Mass.: Harvard Business Review Press. Bragg, S. (2014). Corporate cash management. 1st ed. Centennial: Accounting Tools. Brigham, E. and Ehrhardt, M. (2017). Financial management. 1st ed. Boston, MA, USA: Cengage Learning. Cafferky, M. (2014). Breakeven analysis. 1st ed. New York: Business Expert Press Ehrhardt, M. and Brigham, E. (2011). Financial management. 1st ed. Mason: South-Western Cengage Learning. Garrison, R., Noreen, E. and Brewer, P. (2012). Managerial accounting. 1st ed. New York, N.Y.: McGraw-Hill/Irwin. Gitman, L. and Zutter, C. (2012). Principles of managerial finance. 1st ed. England: Pearson Education Limited. Hoyle, J., Schaefer, T. and Doupnik, T. (2015). Advanced accounting. 1st ed. New York, NY: McGraw-Hill Education.