A STUDY ON

TRAINING AND DEVELOPMENT

With specific reference to

PENA4 TECH SOLUTION INDIA PVT LTD

A Project report submitted to St. Joseph’s College for Women (A), Visakhapatnam, in partial
fulfillment for the Award of the Degree of
Bachelors of Commerce
Submitted By
NAGULAKONDA NIKHILA

Reg. no: 17AE620

Under the guidance of

Mrs. PAVANI,
Assistant Professor
Department of BCOM

ST. JOSEPH’S COLLEGE FOR WOMEN (AUTONOMOUS)

GNANAPURAM, VISAKHAPATNAM.

(2017-2020)
DECLARATION

I N.NIKHILA, Regd.No:17AE620, hereby declare that the project work entitled “A Study On
Budgeting” with reference to FOUR POINTS BY SHERATON, Visakhapatnam submitted by
me to FOUR POINTS, Visakhapatnam is a record of department project work carried out by me
under the esteemed guidance of MRS. K.PAVANI M.COM, DEPARTMENT OF COMMERCE,
ST. JOSEPH’S COLLEGE FOR WOMEN (AUTONOMOUS), GNANAPURAM,
VISAKHAPATNAM.

I further declare that this project is a genuine bonafide work done by me and is not submitted to
any other university published any time before.

PLACE: VISAKHAPATNAM Signature

DATE:

N.NIKHILA(B.Com[comp])

Regd. No: 17AE620

 ST. JOSEPH’S COLLEGE FOR WOMEN (AUTONOMOUS)
Gnanapuram, Waltair R.S. Visakhapatnam – 530004
Andhra Pradesh, India
E-Mail- www.stjosephsvizag.com
Cell- +91-891-2558346

CERTIFICATE

This is to certify that the project work entitled “BUDGETING” with reference to FOUR
POINTS BY SHERATON VISAKHAPATNAM, which is a bonafide company and the work
carried by N.NIKHILA under my guidance and direction in partial fulfillment of the
requirement, for the award to the degree of Bachelor of Commerce (B.COM[comp]) in the
department of Commerce, St.Joseph’s College for Women(A), Gnanapuram, Visakhapatnam.
This has not been previously submitted for the award of any degree, diploma, associate-ship or
another similar title to other universities or institutes either in part or in full.

(HOD, Department of Commerce)

St. Joseph’s College for Women(A),

Gnanapuram, Visakhapatnam.
ACKNOWLEDGEMENT

The satisfaction that accompanies the successful completion of any work would be incomplete
without mentioning people who made it possible and whose encouragement and constant
guidance crowned my efforts with success. I wish to express my deep sense of gratitude to
PRINCIPAL of our college Dr.(Sister)Shyji and the entire staff of the department in commerce
for giving me opportunity for permitting me to do the project and their full support during the
entire period of my education.

I am grateful to my project guide, of department of commerce St.Joseph’s college for women

(Autonomous), Visakhapatnam-530004.

N.NIKHILA
INDEX

CHAPTER-I
INTRODUCTION
NEED FOR THE STUDY
OBJECTIVES OF THE STUDY
SCOPE OF THE STUDY
RESEARCH METHODOLOGY
LIMITATIONS OF THE STUDY

CHAPTER-II
INDUSTRY PROFILE
COMPANYPROFILE

CHAPTER-III
THEORETICAL FRAME WORK

CHAPTER-IV
DATA ANALYSIS AND INTERPRETATION

CHAPTER-V

SUMMARY
FINDINGS
SUGGESIONS
CONCLUSION

BIBLOGRAPHY
ANNEXURE
CHAPTER-I
INTRODUCTION
NEED FOR THE STUDY
OBJECTIVES OF THE STUDY
SCOPE OF THE STUDY
RESEARCH METHODOLOGY
LIMITATIONS OF THE STUDY
INTRODUCTION

A budget is a financial plan for the future concerning the revenues and costs of a business.
However, a budget is about much more than just financial numbers.
Budgetary control is the process by which financial control is exercised within an organization.

Budgets for income/revenue and expenditure are prepared in advance and then compared with
actual performance to establish any variances.

anagers are responsible for controllable costs within their budgets and are required to take
remedial action if the adverse variances arise and they are considered excessive.

There are many management uses for budgets. For example, budgets are used to:

 Control income and expenditure (the traditional use)

 Establish priorities and set targets in numerical terms
 Provide direction and co-ordination, so that business objectives can be turned into
practical reality
 Assign responsibilities to budget holders (managers) and allocate resources
 Communicate targets from management to employees
 Motivate staff
 Improve efficiency
 Monitor performance

Whilst there are many uses of budgets, there are a set of guiding principles for good budgetary
control in a business.

In an effective budget system:

 Managerial responsibilities are clearly defined – in particular the responsibility to adhere

to their budgets
 Individual budgets lay down a plan of action
 Performance is monitored against the budget
 Corrective action is taken if results differ significantly from the budget
 Departures from budgets are permitted only after approval from senior management
 Unaccounted for variances are investigated

A budget outlines our organization's financial and operational goals, so it may be thought of as
an action plan that helps you allocate resources, evaluate performances, and formulate plans.It is
an essential part of your business plan when starting a new business. After the establishment of
our business, budgeting becomes a regular task that normally occurs on a quarterly and/or annual
basis, where past budgets are reviewed and budget projections are made for the next three or
even five quarters or years.The basic process of planning a budget involves listing
your business's fixed and variable costs on a monthly basis and then deciding on the allocation of
funds to reflect goals.

Businesses often use special types of budgets to assess specific areas of operation. A cash
flow budget, for example, projects your business's cash inflows and outflows over a certain
period of time. Its main use is to predict your business's ability to take in more cash than it pays
out.Without a budget, you may not know how your business is performing. A budget provides an
accurate picture of expenditures and revenues and should drive important business decisions
such as whether to:

 Increase marketing
 Cut expenses
 Hire staff
 Purchase equipment
 Improve efficiencies in other ways

A comprehensive budget also is a requirement for obtaining business loans from financial
institutions or seeking equity funding from investors.

Most businesses have fixed costs that are independent of sales revenue, such as:

 Building or office eases or mortgage costs

 Loan payments (if using debt financing)
 Insurance
 Vehicle leases (or loan payments if the vehicle is purchased)
 Equipment (machinery, tools, computers, etc.)
 Payroll (if employees are on salary)

 Utilities such as landline phone and internet charges

Variable costs increase or decrease according to the level of business activity. Examples include:
  Contractors' wages or commissions (for salespeople)
 Utilities such as electricity, gas, or water that increase with activity
 Raw materials
 Shipping and delivery costs
 Advertising (can be fixed or variable)
 Maintenance and repair of equipment

If you're planning on starting a business, planning a budget plays an important role in

determining your start-up and operating costs. The financial plan section of your business
plan provides information on calculating your start-up and operating expenses.

It is important to be realistic with our budget projections. If in doubt, As the budget year
progresses the estimates should be updated monthly with actual figures, enabling you to check
the accuracy of your forecasts. Note that there often are radical differences between actual and
projected revenues and expenses due to unforeseen business circumstances and/or changing
business and economic cycles, such as:

 Gaining or losing a major client

 Having to purchase or replace expensive equipment
 An increase in rent
 Hiring employees
 An increase in competition
 Changes in the tax code
NEED OF THE STUDY

There is a special role of every industry barring up on the need essentiality where everything has
to be done in accordance with standards that are regulated by the governments. The main aim of
any firm is to maximize the wealth of the profits. Which in turn depend on successful sales
activity. To generate sales, investment of sufficient funds in currents assets is required. The need
of current assets should be emphasized, as the sales don’t convert into cash immediately but
involved a cycle of operations, namely operating cycle.

Four points is hospitality industry with varying cycle time for each product. The capital required
by each department in a large organization like Four Points depends on the product target for that
year. To understand this, conceptual idea is not only sufficient but also it needs a wide
knowledge and understanding of the factors that are affecting them. Especially Four Points has
emerged from loss to profit making company.
OBJECTIVES OF THE STUDY
The objective of the study is based upon the part of Financial Performance that is been taken into
consideration i.e. Financial Statements and Analysis. The Study predominantly financial
performance of four points and budgeting.

Specific objectives:

● To study the financial position of the company

● To analyze the financial stability and overall performance four points.
● To find out Financial Strengths and weaknesses of the firm
● To know the Liquidity Position of a firm
● To know the causes of changes in the Cash Position
● To analyze the trends as revealed by various financial statements
● To analyze the profitability and solvency position of the company.
● To compare the performances of the company at different time.
● How it uses its assets and position of working capital
● To study the changes in the asset, liabilities structure and results of operation activities of
the company during the period of the study.
● To know the ability of the firm to meet its current obligations
● To know the overall operation efficiency and performance of the firm To find out
important tools of Short-term, Long-term Financial Planning
● To find out foremost important Financial Decisions
● To know the detailed information about comparative and common size balance sheet

General objectives:

● The study is based upon the part of budgetary control that is been taken into
consideration i.e. system of management and accounting control s. The Study
predominantly of budgetary control FOUR POINTS.
● To ensure planning for future by setting up various budgets according to the requirements
and expected performance of the enterprise and anticipated Performance of the enterprise.
● To coordinate the activities of different departments.
● To operate various cost centers and departments with efficiency and economy.
● Elimination of wastes and increase in profitability.
● To anticipate capital expenditures for future.
● Correction of deviations from the established standards.
● Fixation of responsibility of various individuals in the organization.
 RESEARCH MEATHODOLOGY
Research means knowing about new things. Sometimes, it may refer to scientific and systematic
search pertinent information on specific topic. In fact Research is an art of scientific
investigation.
Research can be defined as the search of knowledge or any systematic investigation to establish
fact. The primary purpose for applied research (as opposed to basic research) is discovering,
interpreting and the development of methods and systems and for the advancement of human
knowledge on a wide variety of scientific matters of year world and the universe.
Research can used scientific method but need not do so research can also being set as a process
that is followed by the person to answer either his or her own quarries or somebody else quarries
about a particular object, person, subject etc.,

Data collection:
The data collections classified into two types they are
 Primary data
 Secondary data

Primary data:
Primary data is the data which is intended to be used by the researcher, the researcher collects the
data depending upon his requirements.
The data for study has been collected from the management of the company. The information
about the industry profile and company profile was gathered from HRD, VSP and the data about
the budget and budgetary control was gathered from Financial Department, VSP.

Secondary data:
The secondary data is collected from information which is used by others. It is not direct
information. This information is already collected and analysis by other and that information is
used by others.
This is taken from the annual reports, websites, company journals, magazines and other sources
of information of steel plant.

The secondary data are collected from following:

❖ Companies annual report
❖ Companies website
 ❖ Manual
❖ Inter office memos (IOM)
❖ Monthly working results
❖ Financial hand book

Data analysis:
❖ Comparative balance sheet
❖ Common size balance sheet
❖ Ratio analysis
❖ Trend analysis
LIMITATIONS OF THE STUDY
The major limitations which faced the researcher in the course of the study are:

● Time limitation which precludes the gathering of detailed information. Seven weeks’
time is not sufficient to conduct the study and compile a report. So that time was a major
constraint.
● The complexities and confidentiality of various operations and
● The analysis and interpretation are based secondary data contained in the published
annual reports of VSP for the study. So that reliability of secondary data is another
limitation.
● The study of financial performance can be only a means to know about the financial
conditions of the company and cannot show through picture of the activities of the
company.

Though the project is completed successfully with a few limitations

 Although every effort has been made to study the “Budgeting” in detail, in an
organization of VSP size, it is not possible to make an exhaustive study in a
limited duration of seven weeks.
 Apart from the above constraint, one serious limitation of the study is that it is not
possible to reveal some of the financial data owing to the policies and procedures
laid down by VSP. However the available data is analyzed with great effort to get
an insight into Budgeting in VSP.
 Analysis of sub topics is limited to some extensions.
 The study is carried basing on the information and documents provided by the
Organization and based on the interaction with the various employees of the
respective departments.
 Budgeting process is very dynamic.
 Budget that were prepared are only based upon trend at the time preparation.
 Flexibility with in the budget is not possible.
CHAPTER-II

INDUSTRY PROFILE
COMPANYPROFILE
 INDUSTRIAL PROFILE

Industry profiles are in-depth documents that give insight into an industry, where it came from,
and where it appears to be going. A typical report looks at the industry leaders, forces affecting
the industry and financial data for the industry.

The production side of business activity is referred as industry. It is a business activity, which is
related to the raising, producing, processing or manufacturing of products. The products are
consumer's goods as well as producer's goods. Consumer goods are goods, which are used finally
by consumers. E.g. Food grains, textiles, cosmetics, VCR, etc. Producer's goods are the goods
used by manufacturers for producing some other goods. E.g. Machinery, tools, equipments, etc.
Expansion of trade and commerce depends on industrial growth. It represents the supply side of
market.

Classification / Types of Industries

1.Primary Industry : Primary industry is concerned with production of goods with the help of
nature. It is a nature-oriented industry, which requires very little human effort. E.g. Agriculture,
farming, forestry, fishing, horticulture, etc.

2.Genetic Industry :Genetic industries are engaged in re-production and multiplication of

certain spices of plants and animals with the object of sale. The main aim is to earn profit from
such sale. E.g. plant nurseries, cattle rearing, poultry, cattle breeding, etc.

3. Extractive Industry: Extractive industry is concerned with extraction or drawing out goods
from the soil, air or water. Generally products of extractive industries come in raw form and they
are used by manufacturing and construction industries for producing finished products. E.g.
mining industry, coal mineral, oil industry, iron ore, extraction of timber and rubber from forests,
etc.

4. Manufacturing Industry: Manufacturing industries are engaged in transforming raw material

into finished product with the help of machines and manpower. The finished goods can be either
consumer goods or producer goods. E.g. textiles, chemicals, sugar industry, paper industry, etc
5. Construction Industry: Construction industries take up the work of construction of buildings,
bridges, roads, dams, canals, etc. This industry is different from all other types of industry
because in case of other industries goods can be produced at one place and sold at another place.
But goods produced and sold by constructive industry are erected at one place.

6. Service Industry: In modern times service sector plays an important role in the development
of the nation and therefore it is named as service industry. The main industries, which fall under
this category, include hotel industry, tourism industry, entertainment industry, etc.

HOSPITALITY INDUSTRY

The hospitality industry is a broad category of fields within the service industry that includes
lodging, food and drink service, event planning, theme parks, transportation, cruise line,
traveling and additional fields within the tourism industry.The hospitality industry is a
multibillion-dollar industry that depends on the availability of leisure time and disposable
income. A hospitality unit such as a restaurant, hotel, or an amusement park consists of multiple
groups such as facility maintenance and direct operations (servers, housekeepers, porters, kitchen
workers, bartenders, management, marketing, and human resources etc.).

The hospitality industry is an industry that depends on the availability of leisure time and
disposable income. A hospitality unit such as a restaurant, hotel, or an amusement park consists
of multiple groups such as facility maintenance and direct operations (servers, housekeepers,
porters, kitchen workers, bartenders, management, marketing, and human resources, etc.).The
hospitality industry is constituted of an array of sub-industries and described as under :

1.Lodging-Accommodation: This sector of the hospitality industry features a gamut from

luxurious hotels to lavish resorts and campgrounds. Accommodation is an absolutely broad
sector of the hospitality industry, ranging from bed & breakfast enterprises and hotels to other
facilities that offer lodging services. Again, customer service is indispensable in providing
accommodation services. And that isn’t all efficiency, integrate comfort, and world-class
amenities are also its foundation. There are three main types of hotel and accommodation
services:
a.Lodging: When people travel from one place to the other, they need a place to sleep. A shelter
which will keep them safe from the atrocities of nature. This results in people booking lodges
and rooms for their stay.

b.Suites: Apart from general lodges to stay, hotel sector offers luxury suites for the stay as well.
Generally, suites are suitable for formal sorts of staying and are much expensive compared to
regular room services.

c.Resorts: The third type of accommodation which is popular among travellers are resorts.
These bring you close to nature and give you a necessary break from your normal routines.

2.Food and Beverage: This is another crucial one of the 5 different sectors of the hospitality
industry. It’s another wide sector of the hospitality industry. Food and beverage sector reign
supreme in the industry. And, for good reasons.

It can range from something as simple as a bistro all the way to a high-end restaurant and every
catering establishment in between. As it’s expected, the food and beverage industry is further
sub-categorized into niches. There can be a humongous list when we categorize the food service
industry as a crucial sector of the hospitality industry but the main categories are :

a. Quick-service Establishments : These are commercial foodservice restaurants that compete

for customers who look to garner quick snacks, drinks, and meals. Typically, they have fewer
employees. In fact, self-service is the norm here. Think of McDonald’s, KFC, Subway, Pizza Hut
etc.
Catering Businesses : This category provides food and beverage catering services for any special
occasion from weddings to birthday parties and everything in between.

b.Full-Service Restaurants: These are your typical restaurants or eateries which feature course
meals, drinks, and a plethora of other food services. These establishments usually seat you at a
table and use waiters to take food orders. From fine dining to casual dining to themed
restaurants; there is a range of these full-service restaurants.
c.Catering Businesses : This category provides food and beverage catering services for any
special occasion – from weddings to birthday parties and everything in between.

3.Travel and Tourism: A lot consider tourism synonymous with hospitality and not as a
different sector of the hospitality industry. Travel and tourism industry is a vast sector of the
hospitality industry with several key players across the globe. Most of them include trains,
airlines, cruise ships, and several crew members in their service. On the whole, players in the
travel and tourism segment are in the business of moving people from one destination to another.

4.Entertainment Industry: This again is a key category of the hospitality industry as it involves
the most important thing of hospitality. Us, the buyers and recipients of all hospitality services.
So, this sector of hospitality thrives for us and to entertain us. Entertainment is a significant part
of our travel these days. If your travelling experience lacks fun and entertainment then you might
not be able to enjoy your time up to the fullest. So, for the successful running of hospitality
businesses, it is important to have in the kitty as many entertainment activities as possible.
Some of the activities which can elevate your experience when it comes to entertainment are:
a.Marinas: Marinas are one of the most popular places to go when it comes to partying. You can
get along with your friends on a private yacht where you can dance, play games, and enjoy the
best of your life.

b.Sports and Gaming: Sports and gaming is a basic thing which people are looking for on their
travel. As a result, Casinos, swimming pools, and other similar activities are becoming an
indispensable part of the hospitality sector.

c.Cruise: Apart from marinas, cruise services are also becoming an essential component of the
hospitality industry. Now, people like to spend their days on luxury ships which sail across the
blue oceans under the clear sky.

d.Nightclubs: Who doesn’t love to dance to their favourite song when on a break? We all do.
This is why hotels have nightclubs services in them.

e.Bars: Sitting around a table and having a couple of drinks with your friends is always a
refreshing experience. This is why bars make an important part of the entertainment sector of the
hospitality industry.It would not be an exaggeration if we make a statement that the most
important segment of the hospitality industry is travel and tourism as others depend on it.
Without profound levels of travelling and tourism in a region, the hospitality industry of the
region won’t grow.

5.Timeshare: An emerging yet vastly important sector of the hospitality industry is vacation
ownership of a place. In this scheme, people, either individuals or parties, own the rights to a
place for a specific time period during the year. We have placed Timeshare on our list of 5
different sectors of the hospitality industry because of the raised interest of hospitality
enthusiasts for Timeshare. Timeshare gives us an option to own our choices and to enjoy
facilities by either buying a part of a facility or getting into a membership plan.

There are many places which people can own for the time being, under the timeshare rule. A
couple of them are discussed below

a.Convention Centres: Convention centres make the base of the hospitality industry as they
offer a place where people can gather in bulks for seminars, conventions, expos, and other
similar things.

b.Villas and Resorts: You can own villas and resorts under the timeshare rule, for some time of
the year and can go and enjoy with your friends or family

Opportunities in the Hospitality Industry:

There are numerous employment opportunities in the hospitality industry, ranging from jobs in
luxury hotels to small establishments to clubs, pubs, restaurants, cafes and everything in
between. Employment opportunities come up frequently in this industry and many
establishments are regularly on the lookout for qualified and trained staff. Hospitality jobs
behind the counter or service roles can be a great place to start your career. Many have found
long-term fulfilling careers in hospitality. Hospitality roles can also be a launching point to
advance your career, providing you with skills and experience that can be a gateway to further
jobs down the track.

Whether you want to further your existing career or switch to another, the hospitality industry
offers a wide range of exciting job opportunities. Although many people immediately think about
hotel work when they hear the word “hospitality,” individuals seeking management positions in
the field can choose among a number of viable employment sectors including travel and tourism,
casino management, and various food and beverage industries.

The hospitality industry can give you the opportunity to operate a tour company, plan events at a
resort, or board a cruise ship as a recreation director. However, in order to succeed in any of
these dynamic fields, the importance of a hospitality administration training cannot be
underestimated.

For those with the proper education and drive, the opportunities in the hospitality industry are
nearly limitless. The World Travel and Tourism Council recently released a report that compared
economic growth in the hospitality industry to growth in other market sectors. The organization
ultimately determined that hospitality and tourism has one of the highest potentials for expansion
of any industry in the world. Because of the dynamic and fast-paced nature of the industry, many
hospitality organizations offer administrative positions to employees at comparatively young
ages.

At the management level, workers in the hospitality industry receive all of the traditional
benefits, such as competitive healthcare packages and retirement plans, that people have come to
expect from a senior professional position. However, the hospitality industry, by its very nature,
typically offers a range of unique and exciting fringe benefits. Depending on your specific area
of professional interest, you may be eligible for free or discounted housing, hotel rooms, airfare
and ground transportation, meals, laundry services, and other valuable amenities.

To capitalize on all that this industry has to offer, you must first educate yourself about the
foundation of hospitality and familiarize yourself with the diverse opportunities that are available
in a wide variety of hospitality fields. In addition to general hotel and restaurant management,
there are employment options in the following, often overlooked, areas

•Airline and railway travel

• Conferences and conventions centers

• Travel agencies

• Tourist offices and ministries of tourism

• Tour operators

• Spas and wellness centers

• Cruise companies

•Event management

• Casinos

• Catering companies

• Bars and private clubs

• Concert and theatre venues

• Museums and other cultural venues

• Theme parks

• Fitness clubs and sports organizations (such as gyms, golf clubs, and tennis facilities)

•Real estate management companies

•Hotel development and construction

• Manufacturers and suppliers of hospitality equipment

Types of Employment Roles in the Hospitality Industry:

Hospitality is providing more than 10% employment in UK approximately to 2.5 million people.
The hospitality business can be divided into two main categories. Firstly the hospitality business
(clubs, bars, restaurants, hotels and contract catering), it accounted the two third of this industry.
Secondly hospitality services like food outlets and hospitals and account one third of the
industry. There are full time and part time employed persons in this sector of the hospitality. It is
noted that employment depends upon the working conditions found in the industry as weekends,
long hours and other flexibilities

Catering, Restaurant, Accommodation, Hotels, Transport, Visitor , attractions, Consumer,

Recreational facilities, Government, Intermediaries, Miscellaneous Services

There are two main types of hospitality jobs which can be divided into two categories:

1) Front-of-House Hospitality Roles: Front-of-house hospitality roles include things like wait
staff who serve beverages and food, baristas or bartenders. This could be in many kinds of
environments from hotels, themed restaurants, resorts and fine dining to more casual settings, i.e.
in cafés, coffee shops, bars and casinos. Front-of-house staff are customer-facing and come in
direct contact with guests and customers.

2)Back-of-House Hospitality Roles: Often referred to as BOH, back-of-house jobs in the

hospitality industry are roles such as chefs, kitchen hands and apprentices. These jobs are done
behind the scenes of an organisation, be it a café, restaurant or hotel, and the staff member does
not generally interact directly with customers or guests in their role. They are the ones that
provide quality services and products for the guests and are vital to a business’s overall success.
They are the wheel behind the scenes that turns the cog so to speak.

Importance to Economies:

Hospitality generates revenue for local economies directly when tourists spend money in hotels,
restaurants and entertainment venues. ... In addition, tourism can stimulate the building of
infrastructure such as roads and public transportation. Also important economically are the jobs
created by the industry. The hospitality industry is growing very rapidly and contributing nearly
10 % of the world’s GDP (Boella, 2000). In the last decades the hospitality industry has got
much importance of vigorous process of expansion. Consequently the hospitality industry is
expanding globally and promoting its growth in a changing multicultural environment.
Hospitality is being built at regional, national and global levels. Internationally oriented
hospitality industry with different companies competes also locally and regionally. A great
number of indicators show the sign of economic growth predicted by the International Monetary
Fund and this growth will be distributed unevenly in developing countries (6.4 %) and (2.2 %) in
advanced nations. Hospitality industry constitutes many subsectors; hotels and restaurant is one
of most source of economic growth.

The travel and tourism sector currently accounts for 10.4% of global GDP Projections say that 72
million jobs will be added to the tourism and hospitality sector over the next 10 years
In 2017, the hospitality industry accounted for 313 million jobs worldwide, which translates to
9.9% of total employment and 20% of all global net jobs created in the past decade.* Hospitality
also supports jobs in arts and culture industries, keeping theaters and arts festivals thriving.

Tourism and Hospitality: The hospitality industry is growing very rapidly and contributing
nearly 10 % of the world’s GDP (Boella, 2000). In the last decades the hospitality industry has
got much importance of vigorous process of expansion. Consequently the hospitality industry is
expanding globally and promoting its growth in a changing multicultural environment.
Hospitality is being built at regional, national and global levels. Internationally oriented
hospitality industry with different companies competes also locally and regionally. A great
number of indicators show the sign of economic growth predicted by the International Monetary
Fund and this growth will be distributed unevenly in developing countries (6.4 %) and (2.2 %) in
advanced nations. Hospitality industry constitutes many subsectors; hotels and restaurant is one
of most source of economic growth.

Tourism and Hospitality: The terms tourism and hospitality are co-related and grouped
together as a single industry. However these both hospitality and tourism industries are viewed
as two individual sectors. There exist overlapping between these two. Tourism is defined as the
persons travel and goes for the places outside of their usual environment for less than one year to
accomplish their business purpose and for leisure; they are not employed there on visiting places.
Hospitality is the provision of the accommodations, venues, meals and drinks to those people
who are out of their homes. People of UK enjoy these services and also other non-resident
residents. Both of these industries cover the restaurants, accommodations, hotels and other
exhibition activities. Tourism is not the subsector of the Hospitality merely a source of the tourist
services. In this way we have made a clear difference between two overlapping industries .We
carry on our subject further to complete the task of hospitality and its subsectors. Hospitality
industry may include the following sectors i.e., Licensed clubs, Food shops, Catering activities,
In-house catering, Exhibition and fair organizer’s activities, Activities of conference organizers
and Other food services

These are the areas of the hospitality industry which provide the services in different ways.
Hospitality is the focal point in those countries where tourism is the major export industry. Cross
border flow of business people and capitals has flourished the hospitality industry. The
hospitality is the main source of foreign currency exchange and largest employers to employ the
workforce. Hospitality brings the different cultures together in global community. Countries
suffering from trade balances look the hospitality and tourism to close the gap. Therefore the
hospitality is a not concept but it is a driving force in the global market. Lifestyle and
globalization of business is communicated in foreign languages and coping with different
political and social systems. Hospitality companies require the globally think to survive and
competing hospitality organizations work maturely in UK and U.S. The companies competing in
all aspects of the hospitality industry will move across their national boundaries. The view that in
future the global entities with advantages will compete due to globalization is in not acceptable.
 COMPANY PROFILE

Marriott International was formed in 1993 when the Marriott Corporation split into two
companies, Marriott International and Host Marriott Corporation. In 1995, Marriott was the first
hotel company worldwide to offer guests the option to book reservations online, via the
company's implementation of MARSHA (Marriott's Automatic Reservation System for Hotel
Accommodations). In April 1995, Marriott International acquired a 49% interest in Ritz-Carlton
Hotel Company LLC. Marriott International believed that it could increase sales and profit
margins for The Ritz-Carlton, a troubled chain with a significant number of properties either
losing money or barely breaking even. The cost to Marriott was estimated to have been about
$200 million in cash and assumed debt. The next year, Marriott spent $331 million to take over
The Ritz-Carlton, Atlanta and buy a majority interest in two properties owned by William
Johnson, a real estate developer who had purchased The Ritz-Carlton, Boston in 1983 and
expanded his Ritz-Carlton holdings over the next twenty years.

The Ritz-Carlton began expansion into the lucrative timeshare market and undertook other new
initiatives made financially possible by the deep pockets of Marriott, which also lent its own in-
house expertise in certain areas. There were other benefits for Ritz-Carlton flowing from its
relationship with Marriott, such as being able to take advantage of the parent company's
reservation system and buying power. The partnership was solidified in 1998 when Marriott
acquired majority ownership of The Ritz-Carlton. Today, there are 91 Ritz-Carlton properties
around the world.

Restructuring (2000–2013)

Marriott's hotel in New York after the collapse of the World Trade Center towers on 9/11
The Marriott World Trade Center was destroyed during the September 11, 2001, attacks. In 2002
Marriott International began a major restructuring by spinning off many Senior Living Services
Communities (which is now part of Sunrise Senior Living) and Marriott Distribution Services, so
that it could focus on hotel ownership and management. The changes were completed in 2003.
Marriott International owned Ramada International Hotels & Resorts until its sale on September
15, 2004, to Cendant. In 2005, Marriott International and Marriott Vacation Club International
comprised two of the 53 entities that contributed the maximum of $250,000 to the second
inauguration of President George W. Bush.

On July 19, 2006, Marriott announced that all lodging buildings it operated in the United States
and Canada would become non-smoking beginning September 2006. "The new policy includes
all guest rooms, restaurants, lounges, meeting rooms, public space and employee work areas."
San Diego Marriott Marquis & Marina, one of the highest revenue-generating Marriotts in the
United States. There were bombings at the Islamabad Marriott in 2008 and at the Jakarta
Marriott in 2009. On November 11, 2010, Marriott announced plans to add over 600 hotel
properties by 2015. The bulk of the additions will be in emerging markets: India, where it plans
to have 100 hotel properties, China, and Southeast Asia. On January 21, 2011, Marriott said that
pornography would not be included in the entertainment offered at new hotels, which will use an
Internet-based video on demand system. On December 13, 2011, J.W. Marriott, Jr. announced he
would be stepping down as CEO of the company, while assuming the role of executive
chairman. It was announced that Arne Sorenson would be taking over as CEO as of March 2012.
U.S. Republican presidential candidate Mitt Romney released his 2011 federal income taxes on
September 21, 2012, showing that he declared $260,390 in director's fees from Marriott
International, despite the fact that news was released on January 13, 2011, that he had already
stepped down from the Marriott International board to run for president. His released 2010 tax
returns showed earnings in 2010 of $113,881 in director's fees from Marriott.[28] In February
2012, Bloomberg reported on Romney's years overseeing tax matters for Marriott, which had
included several "scams" (quoting Sen. John McCain) and legal actions brought against Marriott,
which Marriott lost in court, over its manipulations of the U.S. Tax Code. In December 2012,
Guinness World Records recognized the five-star JW Marriott Marquis Hotel Dubai as the
world's tallest hotel.

Recent developments (2014–present): On October 3, 2014, the US Federal Communications

Commission (FCC) fined Marriott $600,000 for unlawful use of a "containment" feature of a Wi-
Fi monitoring system to deliberately interfere with client-owned networks in the convention
space of its Gaylord Opryland Resort & Convention Center in Nashville. The scheme disrupted
the operation of clients' mobile telephone hotspots by sending fraudulent Wi-fi de-authentication
packets. Marriott International, Inc., the American Hotel and Lodging Association and Ryman
Hospitality Properties responded by unsuccessfully petitioning the FCC to change the rules to
allow them to continue the wilful jamming of client-owned networks, a position which they were
forced to abandon in early 2015 in response to backlash from clients, mainstream media, major
technology companies, and national mobile carriers. The incident drew unfavorable publicity to
Marriott's practice of charging transient lodgers $13–15/day for wi-fi connections, routinely
included in the base price at most discount chains,and to exorbitant wifi fees (typically $250–
1000 per device) charged to convention-goers at a time when the $2.25 billion annually in ever-
increasing "incidental fees" charged by US-based hotels to their lodgers was already drawing
criticism and negative media coverage.

Acquisitions: On January 27, 2015, Marriott acquired Canadian hotel chain Delta Hotels.Delta
operated 38 hotels in Canada at the time of acquisition; it has since expanded to the United
States, Europe, and Asia.

On November 16, 2015, Marriott announced the acquisition of Starwood Hotels and Resorts
Worldwide for $13 billion.A competing offer for Starwood at $14 billion from a consortium led
by China's Anbang Insurance Group was announced March 3, 2016, moving Starwood to cease
the deal with Marriott and pursue the offer from Anbang Insurance Group. After Marriott raised
its bid to $13.6 billion on March 21, Starwood terminated the Anbang agreement and proceeded
again with the merger with Marriott. Following all necessary regulatory approvals in the United
States and around the world over the course of 2016, Marriott closed the merger with Starwood
on September 23, 2016, creating the world's largest hotel company with over 5700 properties,
1.1 million rooms, and a new portfolio of 30 brands. The Starwood acquisition gave Marriott a
larger non-US presence; approximately 75% of Starwood’s revenues were from non-US markets.
The acquisition was the largest of its sort since 2007 when Blackstone acquired Hilton for $26
billion. Executives noted that total transaction and integration expenditures may exceed $100
million.

Data breach: On November 30, 2018, Marriott disclosed that its Starwood Hotel brand had
been subject to a security breach. After the disclosure, New York Attorney General Barbara
Underwood announced an investigation into the data breach.
Initially, Marriott admitted that 500 million customer's personal information had been exposed. It
later amended their admission to "less than 383 million" customers and claimed many of the
customer's payment cards had expired.

MARRIOTT BRANDS :

Marriott and Starwood have respectively positioned each one of those 30 brands up to this point,
as well take on how they really operate in the current hospitality landscape.

As of September 23, 2016, Marriott operates 30 brands internationally.

Luxury:

•JW Marriott Hotels

•The Luxury Collection

•The Ritz-Carlton
•St. Regis Hotels & Resorts

Upper upscale

•Bulgari Hotels & Resorts

•Edition
•Marriott Marquis

•Design Hotels

Premium

•Delta Hotels

•Marriott Hotels & Resorts

•Marriott Vacation Club

•Marriott Executive Apartments

•Sheraton Hotels and Resorts

•Autograph Collection Hotels

•Gaylord Hotels

•Le Méridien

•Renaissance Hotels

•Tribute Portfolio

•Westin Hotels & Resorts

Select
•AC Hotels by Marriott

•Courtyard by Marriott

•Aloft Hotels

•Four Points by Sheraton

•SpringHill Suites by Marriott

•Fairfield Inn by Marriott

•Protea Hotels by Marriott

•Moxy Hotels

Long Stay

•Element by Westin

•Residence Inn by Marriott

•Towne Place Suites

Operations :
Marriott is the first hotel chain to serve food that is completely free of trans fats at all of its North
American properties. The hotel is noted for providing copies of the Book of Mormon in addition
to the Bible in its rooms. As of 2017, the company had approximately 177,000 employees.

Finances:

For the fiscal year 2017, Marriott International reported earnings of US$1.372 billion, with
annual revenue of US$22.894 billion, an increase of 34.1% over the previous fiscal cycle.
Marriott International's shares traded at over $101 per share, and its market capitalization was
valued at over US$39.1 billion in October 2018.

FOUR POINTS BY SHERATON

Four Points by Sheraton is a brand of hotels targeted towards business travelers and small
conventions. It is owned by Starwood Hotels & Resorts, which is a subsidiary of Marriott
International. The group operate more than 300 hotels worldwide under the Four Points by
Sheraton brand. Four Points by Sheraton operates hotels on six continents, including nine in
Africa, 127 in the Asia Pacific region, twenty five in Europe, ten in the Middle East, 187 in
North America, and twelve in South America.

History
In April 1995, Sheraton Hotels and Resorts introduced a new hotel brand, Four Points by
Sheraton Hotels, to replace the designation of certain hotels as Sheraton Inns. In 1998, Starwood
Hotels & Resorts Worldwide, Inc. acquired ITT Sheraton, outbidding Hilton. In 2000, Starwood
re-launched Four Points by Sheraton, now targeted as a premier upscale hotel chain for business
and leisure travelers. Four Points hotels also have a "Best Brews Program" and a chief beer
officer, Scott Kerkmans, who selects Craft beer to serve in their hotels.

Four Points by Sheraton is a brand of hotels targeted towards business travelers and small
conventions. It is owned by Starwood Hotels & Resorts, which is a subsidiary of Marriott
International. The group operate more than 300 hotels worldwide under the Four Points by
Sheraton brand

Marriott Purpose:

Our Purpose is to Open Doors to Opportunity for our:

•Associates – Create a Take Care environment for personal and professional growth

•Customers – Create platforms to deliver incredible experiences and genuine hospitality for our
guests

•Owners & Franchisees – Harness the power of the merger to deliver profitable investments and
a global portfolio
•Shareholders – Drive superior financial performance

•Business Alliances – Create the future of travel through our collaboration with suppliers and
key partners

•Communities – Invest with purpose in the places where we live and work

Target Guest:

The Independent Traveler is career-driven and hard-working, yet seeks a work-life balance.
Strategists by nature, they know what they want and go for it. They tell it like it is. Social or
seeking solitude, it depends on the day or occasion. They are flexible and easygoing, but never
compromise their standards

Brand Values

•Honest

Best Brews, local sports, a place to unwind. A familiar place with an authentic sense of the local,
and friendly genuine service, guests relax for a greater travel experience, whether on business or
pleasure.

•Uncomplicated

Approachable, and straightforward. We cater to the smart, independent traveler with our
simplified, not simple, experience at Four Points. We offer what matters most, plus extras guests
want.

•Comfort

Classic and timeless. Casual and relaxed. Our style is modern, always practical, but never trendy.
A place designed with the traveler in mind
CHAPTER-III
THEORETICAL FRAME WORK
MEANING:

A budget is a financial plan for a defined period, often one year. It may also include planned
sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities and cash
flows. Companies, governments, families and other organizations use it to express strategic plans
of activities or events in measurable terms.

A budget is the sum of money allocated for a particular purpose and the summary of intended
expenditures along with proposals for how to meet them. It may include a budget surplus,
providing money for use at a future time, or a deficit in which expenses exceed income. A
budget (derived from the old French word meaning purse) is a quantified financial plan for a
forthcoming accounting period. A budget is an important concept in microeconomics, which uses
a budget line to illustrate the trade-offs between two or more goods. In other terms, a budget is
an organizational plan stated in monetary terms. In summary, the purpose of budgeting tools is
to:

1.Provide a forecast of revenues and expenditures. This is achieved by constructing a model of

how a business might perform financially if certain strategies, events and plans are carried out.

2.Enable the actual financial operation of the business to be measured against the forecast.

3.Establish the cost constraint for a project, program, or operation.

The budget of a company is often compiled annually, but may not be a finished budget, usually
requiring considerable effort, is a plan for the short-term future, typically allows hundreds or
even thousands of people in various departments (operations, human resources, IT, etc.) to list
their expected revenues and expenses in the final budget.

As the budget estimate is being developed, additional tasks may be identified because the work is
being further defined. It may be necessary to update the WBS and the project schedule to include
the activities identified during the budget estimating, such as equipment, materials, and other
non-human resources.

The budget management plan is a description of the method for how expenses will be managed,
including a preliminary disbursement schedule. For example, the accounting, expense
verification, and purchase payment procedures should all be explained in the budget
management plan. The plan may be formal or informal based on the needs of the project
stakeholders. The budget management plan can describe the authorization levels for purchasing,
donor regulations or expenses not authorized by the donor.

Resource Requirements:

Resource requirements involve determining what resources (people, equipment, services, and
material) and the quantities of those resources are required to complete the project. The projects’
WBS, scope statement, historical information, resource information, and policies are inputs used
to determine the resources for the project. The main output is a list of resource requirements that
provide the basis for budget estimating and budget controls, and provide valuable information to
the project resource management process.

There are four typical types of resources under which all requirements can be grouped: Human
or Labor resources; including consulting services, consist of the right people with the expertise
and skills needed to complete the activities on the project schedule. People may come from the
organization, or hired for the duration of the project. People skills also include consultants who
bring a high level technical expertise that is not found in the organization or in the local labor
market. The project will develop a list of the human resource requirements detailing the expertise
level, areas of experience, education and language requirements. This information will be used in
the Resource management process to acquire or contract the right people Equipment and
Material resources equipment, include all the specialized tools needed by the project, from water
pumps to electrical generators that will be used by the project or delivered to the beneficiaries, it
also includes the need for vehicles and office equipment such as computers and printers. The
materials include a wider category of requirements such as utility services such as electricity,
telephone lines, access to the internet, office material, office space and used by the project. The
material may also include building materials that will be used to build facilities, or food and
medicines that will be delivered to the beneficiaries

Budgeting in Corporate Sectors :

If the actual figures delivered through the budget period come close to the budget, this suggests
that the managers understand their business and have been successfully driving it in the intended
direction. On the other hand, if the figures diverge wildly from the budget, this sends an 'out of
control' signal, and the share price could suffer. Campaign planners incur two types of cost in
any campaign: the first is the cost of human resource necessary to plan and execute the
campaign.

The second type of expense that campaign planners incur is the hard cost of the campaign itself.

"The use of budgetary control is one of the key detective controls in many hotel businesses”
Chin, J., Barney, W and O’Sullivan. The traditional idea on the concept of hotel is a sort of
business establishment that offers paid temporary housing or simply lodging. Such services are
provided in a short term basis and it concludes in a specified period of time. In the meantime,
money is often referred as the income of the business and on the other hand budgets provides a
guideline for any expenditure and increase the shareholders wealth and owners interest in terms
of providing a standard service for the business to stand creditable. “The budget is like an airline
Pilot’s flight plan; it sets out in figures where to steer in order to reach a given objective” Fenton,
Lawrence, Fowler, Norman A., Parkinson, Geoff. Without a clear budget in mind, the business
would not achieve the targeted return or perhaps maximised return required by the owner of the
business since it cannot identify the risks and costs involved in its future trend. “The process of
budgeting is considered to be a valuable control tool in the hospitality industry”. The primary
concept and as stated before, hospitality industry is an operation establishment that offers short-
term paid lodging to mostly travellers, tourists and other people. This is the traditional and main
or common idea of people when they hear the term hotel.

In the earlier days, hotels services were limited, such as a bed and its complete bedding, a locker,
a small table – most of the time side table, and a washstand that includes bathroom and other
comfort facilities. Additional features include telephone service, television (cable TV), and other
necessary yet basic things like coffee or tea making accessories. In addition from the extended
line of facilities and services, hotels also include some other special operations. At present time,
the services provided by hotel has extended far more than their core business and presently
hotels are offering events, banqueting and conference services.
Most commonly hotels are said to be service-oriented. The identity of a hotel is based on the
service particularly on the quality and overall operational standards. The presence of a hotel
classification based on stars rating system.

IMPORTANCE OF BUDGETING IN HOSPITALITY INDUSTRY :

The use of budget and budgetary control is now a vital part of the Hospitality industry
accounting and should then be use as a benchmark to measure their performance as well setting
up their financial target. “The budgeting process is often used not only to plan ahead, but also for
target setting and raising individual performance.” Adams, Debra. Hotel business alone is
continuously growing in the 21st century. “The UK hotel market was valued at £14bn in 2006,
having an increased by 28.9% since 2002”. This industry comprises hotels and other
accommodations, restaurants, fast food retail, bars, and catering. In order to sustain in this
competitive market or to perform as a successful key player, any hotel industry must adopt
budgeting; hence this will assist the management to plan ahead for their future target. “Budgeting
is planning. In order to make meaningful decisions about the future a manager must look ahead.
One way to look ahead is to prepare budget or forecast”. Gareth Owen (1998) has explained
budgetary process in hotel business by drawing a budgetary cycle.

•Environmental Influences audit

•Internal resources audit

•Actual result

•Master Budget

•Departmental Budget

•Strategic Plan

(3-7) years

•Annual Business plan

•Long term Strategic Gap

•Short term Operational gap

The author has explained the overall planning cycle a top down process and for a long term
objectives should determine any short term activity that has a significant impact in operational
process. A strong hand in controlling their daily operation; for instance what is done from minute
to minute, hour by hour and day to day will have a direct impact on long term plans. On the other
hand controlling in any short term activities will directly influence in any long term objective.
Therefore long terms aim or objective needs support from short term objective.

There are several kinds of budgets are employed in hospitality establishment. For instance
Capital Budget, Operating Budget, Master Budget, Departmental Budget, Fixed Budget, Flexible
Budget. Each of these different kinds of budget comprise of many other type.

PROCESS OF BUDGETING:

The process of budgetary practices in a hotel starts with the departmental budget, the
consequence behind that is a departmental budget will give overall cost related to the many parts
of the hotel for instance a house profit cannot be estimated without knowing the cost associated
with department like housekeeping, valet, repairs and maintenance, room service reception etc.
Also cash budget cannot be prepared without the knowledge of departmental revenue and
expense hence the overall cost of the hotel. Departmental budget is probably the most difficult to
prepare after the sales budget and involve a lot of manpower and moreover time consuming. The
departmental budgeting process can be summarised in four steps.

1. Assign a task for the department managers to gather information such as revenue, cost and
expenditure.

2. Analyse the past trend and estimate any revenue generated by the revenue centres like
Brassiere, Banqueting, Restaurant, Front Office (reception), business centre, room service.
3. Subtracts any expenditure from the estimated revenue related to the department.

4. Finalise the information with the department managers before combining into one report

At this point all the expenses and revenue should be combined with a detail report of explanation
for the budgeted cost and revenue for that specific period, the department manager will have to
decide whether this budget is feasible over that period or not, once this has been approved by the
D.O.F it will then be combined in the Hotel Master Budget.

Once the departmental budget has been established its time to prepare the cash budget, this will
help the management to see the detail view of their cash inflows and outflows and will enable to
plan a head for any expenditure. In today’s financial world almost every company adopt a cash
budget as its help the management making decision about their future abilities for paying any
debt as well as expenditure. Having discussed the budgetary process, many hotel industries uses
more advanced, reliable techniques in addition to budgetary process to clarify any last minute
adjustment prior to the budgetary period another word forecast is an updated version of the final
budget. Forecasting is mainly use in budgeting and it also could be applicable to many other
aspects in the industry. “A more accurate forecasting of room occupancy rates would facilitate
strategic planning and enhance the decision-making procedures of hotel management
companies”.

BUDGET ESTIMATES :

Once all project requirements have been documented, the next step is to determine the costs of
each requirement which will result in the creation of the project budget. A cost estimate, which is
the process to approximate the costs that the project will spend to get or use the project resources

Budget estimates are obtained from the people responsible for managing the work efforts. They
provide the required expertise to make the estimate and provide buy-in and accountability during
the actual performance of the activities.
The team members identify people or labor categories required to perform the work and multiply
the cost of the labor by the number of hours or days required to complete the task, as discussed in
schedule management. Determining how long the task performance takes is the single most
difficult part of deriving a cost estimate. The labor costs should factor in vacation time, sick
leave, breaks, meetings, and other day-to-day activities. Not including these factors jeopardizes
both schedule and cost estimates.

Non-labor charges include such items as material costs, travel, computer equipment, and vehicle
costs. As with developing a project schedule, documenting assumptions made while developing
the project budget are critical to the success of the project. Without a clear documentation of
these assumptions, tracking the budget is not only difficult but risky. If, for example, a budget
assumed that the material would be acquired at one price, but months after the project has started
the cost of the material has increased due to market, which creates a budget problem. If the
assumption is not documented, the project manager may inadvertently increase project costs and
unknowingly and may jeopardize the chances for the project’s success.

Development of project budgets typically requires more than one person. A good process is to
have the same people who reviewed the WBS activity list and schedule review the budget. Upon
completion of a draft budget, interview the team and determine if the work descriptions,
schedule, and associated budgets are complete and accurate. In addition to estimating the budget
the project needs to take into account all corresponding taxes, fees or other expenses don't relate
to resources. This will help give a total view of the project budget. There are three types of
budget estimates that occur during the project cycle, these estimates – rough order of estimate,
contract and definitive, vary primarily on when they are done, how they are used and how
accurate they are.

Rough estimate, Project managers develop the first budget estimate used before or during the
project initiation phase; to get a quick estimate of what would the costs of the project be to see if
there is an interest in the organization or donor. It provides a rough idea of the project budget,
estimates are based on high-level objectives, provides a quick view of the project deliverables,
Most rough estimates, depending on the project, have a range of variance from –25% to +75%.
The project manager shouldn't invest too much time in creating these initial estimates. Rough
estimates, are simply used to have a good look at the project's initial perceived costs, and should
not be used as a definitive estimate or an estimate for RFP purposes Contract estimate, is more
accurate, it is formulated late in the project initiation stage, it's done either from the donor’s RFP
requirements, which sometimes includes conditions and formats on how to present a budget –
such as an account code. It is based on analogous estimating—taking budget lessons learned
from a similar project and applying them to the current project. The contract estimate, starts from
objectives and works its way down into the project details. Like the rough estimate, this estimate
should includeconditions, a range of variance, and any assumptions that went into the
calculations. A contract estimate is quick, but not very accurate. The range of variance in the
budget estimate is from –10 percent to +25 percent. This is the estimate that most of the time
goes into a proposal and it’s the basis for project negotiations between the donor and the
organization. Definitive Estimate, is the most accurate of the estimate types, but takes the most
time to create. The definitive estimate makes use of the work breakdown structure (WBS); which
is a deliverables-oriented decomposition of the project scope.This type of estimate is usually
made during the planning phase of the project to get detailed information on all the project costs
and it uses the organization chart of accounts to track costs in the accounting system. The
definitive estimate is used to for estimating final project costs and used for making purchase
decisions where the actual costs are required before making payments.

The definitive estimate is used throughout the project life cycle and updates as soon as new
information is made available. The accuracy of this estimate is normally -5 percent to +10
percent, meaning the actual costs could be 5 percent less or 10 percent more than the definitive
estimate. Analogous, this estimate technique uses the actual costs of a previous, similar project
for the basis for estimating the costs of the current project. This method is generally less costly
than others, takes less time but is less accurate. Analogous estimates are most reliable when a
previous project is similar in the objectives and activities to the current one. Additionally the
people preparing the estimates must have the required expertise to determine if certain activities
will be more or less expensive on the new project. Top-down estimate, it is a budget estimate
when the total project budget is known and the project needs to know the costs of each individual
activity, in this scenario the project determines the number of activities or outputs the project can
produce with a given budget. A fixed budget is the broken down using the WBS to determine the
number or quantity of activities that can be achieved with the budget. The project may decide to
reduce or increase certain activities or reduce the number of WBS levels to fit the budget
limitations.

Top down uses actual budgets from activities in similar past projects.Bottom Up estimate
requires estimating the individual activities and the cost of each input and is adding them up to
get the project total. A detailed WBS is needed to determine all the activities in the project and
determine all required resources such as personnel, equipment and materials. Staff responsible
for an activity or with expertise in a specific area develops the estimates of the lowest level of the
WBS and all estimates are added to create estimates for each higher level of the WBS and finally
for the entire project. In this technique the estimate starts with a fixed number of activities and
the estimate calculates the total budget. Parametric estimates use standardized parameters that
define the costs of an activity or task for a specific rate or output. For example the costs of
training one person are a rate that can include people, material and equipment costs that once it is
multiplied for the required number of people that need to be trained, gives the total budget for the
activity.

For this example the parameter may include the type of location, length of the training.
Parametric model is quite popular in construction projects, costs can be estimated based on
square meters of construction to arrive at the total cost for a building. The accuracy of this
method depends on the data available and whether or not the model can be scalable to different
conditions.

FORECASTING :

Forecasting is normally done in monthly basis prior to the beginning of the month, many
company has more frequent forecasting policy. Two most commonly use forecasting method is
the “moving average” and “multiple regressions” and this process is normally carried out by the
finance department of any hotel.

In Marriott, the hotel and its management start to prepare the budget in middle of the year for the
upcoming next one year. The officers and members of the top level finance management are the
ones responsible for the completion of the most appropriate and inclusive yearly budget. The
hotel uses a bottom up approach budgeting system another word “participative budgeting
method”. Participative budgeting involves employee’s participation in preparation of the
budgeting at various level of organisational aspect, even though the final decision is made by the
top level management. Participative budgeting gives employee an excellent opportunity to take
the ownership of their own budget document and motivation to meet the target. “A budgeting
system in which all budget holders are given the opportunity to participate in setting their own
budgets”.In this method all the managers are responsible for preparing their own departmental
budget with the assistant of a finance manager. The departmental managers normally start
preparing the budget in the month of July based on past trend, the managers will look ahead for
the whole year projected expense like wages and salaries, any fixed and variable cost like labour
cost and then calculate the required profit by the owner. The managers will then evaluate the
budget inside-out to clarify is it practical? Is it reachable? The finance manager will then put
forward their draft budget to upper level finance management for approval. Once this has been
approved by the Director of Finance, general manager and the executive team it will then unite in
their master budget and finally a copy of the Master budget will be sent to their regional office
for approved by the Area director of finance.

Marriott previously used a software package for helping the departmental manager preparing the
budget which no longer supported and exchanged with the idea of using Excel spreadsheet
Template. This template helps the manager whose are not very budget educated and has a limited
understanding of budgeting concept. After end of each month the hotel publish an internal P&L
(Profit and Loss account) report for the departments to evaluate the performance. The department
head will be asked to critique on their result to the director of finance (DOF) and DOF finally
create a critique report which will be reviewed by the regional office.

The following discussion is an example of Marriott Hotel Master Budget for a year. However, it
is noted that specific figures are altered for the purposes of corporate confidentiality.

BUDGET EXECUTION :

Once the project budget has been reviewed and approved the next step is to create a budget
baseline, the baseline is a time-phased budget that project managers use to measure and monitor
budget performance.
The baseline will be used to compare with the actual costs incurred by the project as it makes
progress, every month new data come from the expenses in personnel, purchases of goods and
services and other project expenses such as benefits and shared costs.

The budget baseline will be used to control the budget using the Earned Value calculations to
determine how the project is performing according to the progress made. Usually the total
project is divided the total months/years of the project duration. One of the problems with this
approach is that project seldom follow a linear progression. Most

project budgets follow an S curve progression in which the initial months the project doesn’t
incur in many expenses, the chart below shows an example of a project budget chart in which the
planned budget is a dotted line and the actual budget is shown as a solid line.

Executing the budget is the action of authorizing the expenses approved in the project budget, the
project manager then initiates to carry the activities that lead to hiring project staff, purchase of
equipment, materials and services, all according to a project procurement plan developed during
the resource management process. This step occurs after the budget has been approved and the
project authorized to start its activities according to the project plan. At this moment the finance
department of the organization and the donor has established the disbursement schedule that will
put financial resources on a bank account available for the project.

BUDGET TARGETS:

Project budgets are usually set against finance department guidelines to track against established
targets such as a fiscal year, but the project may need its own targets to monitor for specific areas
of activities of the project. One of these areas is the project milestones set in the project schedule
and its corresponding set of activities. By setting budget targets against a schedule the project
will be able to have a better opportunity to monitor and control the budget. For example a phase
target is set at $60,000 for starting March 1st for three months. On May 30 the budget monthly
reports that $55,000 were spent, which may indicate the project is on track, but a revision of the
activities for that phase shows that only 60% have been completed, and with only $ $5,00 left the
project will not be able to complete the activities of the phase. The project manager needs to set
budget targets to monitor the performance of the project work.

AUTHORIZE EXPENSES:

Authorizing expenses follow the organization's policies that determine who can authorize
expenses on behalf of the project and the limits of the authorizations, based on the amount some
organizations choose to have different levels of authorization, for large amounts two or three
signature may be needed to ensure the donor that proper controls are applied to safeguard the
correct use and application of the funds received from the donor. The project manager usually
approves the purchase orders for all project expenditures for material, equipment and services
following the project schedule plan and the resource requirements list. The project will usually
rely on the financial and accounting procedures that the organization has in place for purchasing
good and services, especially when purchasing items of high costs. The section Resource
management discusses the procurement plans in more details and the processes the project gets
involved to obtain vendor quotes and manage vendor contracts.

BUDGET CONTROL:

Monitoring and controlling the project budget ensures that only the appropriate project changes
are included in the budget baseline, that information about authorized changes are communicated
and corrective actions are taken by those in charge.The action of budget control is also a process
of managing the budget.

Budget management is the process by which costs or expenses incurred on the project are
formally identified, approved and paid. Purchase order forms are completed for each set of
related project expenses such as consulting services, equipment and material costs. Depending on
the authorization level the purchase order forms are approved by the project manager and
recorded by the finance unit for tracking, donor reporting and auditing purposes.

Controlling the budget is a critical responsibility of the project manager, and it is equally
important that the organization defines the roles and responsibilities of all parties involved in
budget control. Usually the finance department's responsibility is to record, track and
monitor the budget from a cost accounting perspective and generates reports for the organization
management and the donor as part of the compliance requirements such as ensuring the correct
accounts are properly used and recorded. The finance unit is not responsible for monitoring if the
project budget follows the project goals and targets, that is the responsibility of the project
manager who needs to use the reports and monitors the budget and determine if the resources are
used according to plan and identify any deviations, changes or modifications to the budget.

The emphasis on project budget control is fundamentally different from the traditional cost
accounting. Cost accounting deals with issues involved in reporting the expenses to the correct
components of the established budget cost centers and account codes and focuses on collecting
accurate actual cost information with specific attention to the elements of the code of accounts.
On the other hand project budget control, on the other hand, focuses on areas of described in the
WBS. Cost accounting is not the main concern of the project manager it is the expenditure
related to the specific deliverables of the project.

Cost accounting usually focuses on historical information, whereas a project budget control
focus on improving performance and predicting the future. Small projects may work through the
procurement and accounting unit of the organization’s main financial function. The project
manager usually maintains basic information as part of the project's control and reporting
activities. Larger projects may need their own finance function capability. Large, complex or
joint-partnership projects might even need a professional accountant and a team to deal with the
volume of work. Some projects under a joint partnership are run as entirely separate units
requiring their own legal, financial and organizational structure. The project may even use
accounting software to manage the project's finances independently of the organization’s overall
accounting, but the data would be consolidated into the parent organizations' books.

BUDGET REPORTING :

Reports from the finance unit, request for purchase approval from the procurement unit, and
reports from the project team are used to track the project budget and provide a picture of how
the project spending is tracked with the budget. The project will need to determine the format
and the content of the budget reports it needs to control project expenses.
The typical report contains a list of all budget accounts (COA) and

that list the budget baseline, the cumulative expenses to date, the balance to date and the burn
ration or how the budget is spent according to the yearly budget plan. Below is a simple example
of a budget report:

1. Expense Reports, reports provide the expenses to date by account, project number and funding
code.

2. Variance Reports, show the difference between what has been expensed and the approved
budget, the balance for each account.

3. Burn Ratio Reports, show the rate at which the project is using the budget according to the
original plan, a quick method to see if the project budget is on track.

Project reports contain direct project expenses, administrative or overhead expenses and
personnel costs including benefits.

BUDGET PERFORMANCE:

Budget performance is the activity to see if the project expenses are being executed according to
the budget plan and helps identify deviations and develop corrective actions. The method uses to
monitor the performance of the budget depend on the accounting system used by the
organization to track costs expenses. If the project only uses the accounting system to record
what funds are available, the picture may not be completed as the accounting system may only
show actual expenses and doesn’t take into account the contacts, purchase orders and other
monetary commitments that are still not accounted for on the general ledger.

Accounting reports typically report on invoices that have been paid to date. The project manager
needs to track actual expenditures and all monetary commitments made to vendors or consultants
in the form of contracts or purchase orders that will only be recorded in the accounting system
once the invoices are paid. Otherwise, by just looking at the accounting reports may give the
impression that the project has more money that what is actually available.
EARNED VALUE MANAGEMENT:

Earned Value Management (EVM) is a project management technique that measures project
progress objectively. EVM combines measurements of scope performance, schedule
performance, and cost performance, within a single integrated methodology. EVM provides an
early warning of performance problems while there is time for corrective action.

EVM improves the definition of project scope, prevents scope creep, communicates objective
progress to stakeholders, and keeps the project team focused on achieving progress. EVM
emerged as a financial analysis specialty in the United States Government programs in the
1960s, but it has since become a significant branch of project management. EVM can be scaled
to fit projects of all sizes and complexity.Planned Value (PV), is the total budget for an activity
or the planned budget to be spent on an activity during a give period. If an activity is scheduled
to last 5 days and will have a total cost of $1000, then each day costs $200. To get the planned
value at a given date one needs to compare the value between the start date and the status date,

For example, on the third date the planned value of the activity is $600 or $200 times 3. Actual
Cost (AC), is the total direct and indirect costs incurred in accomplishing work on an activity
during a given period. For the example above the actual costs incurred for each day of work,
even though the example above showed a cost of $200 per day, the project may have incurred in
$100 of additional costs, making the actual costs in the third day higher than the planned $600.
Actual cost data comes from the accounting records. Earned Value (EV), is the percentage of
work actually completed multiplied by the planned value. Using the example above the project
estimates a 50% completion, multiplied by $600 gives a value of $300 for that activity on the
third day.

Cost Variance (CV), is the value obtained by deducting the project actual costs from the earned
value, it shows the difference between the estimated cost of an activity and the actual costs of the
activity. A negative number means that the work done cost more than planned, a positive number
means the work done cost less than planned. IN the example the Cost Variance will be $300-
$700 = -$400 a negative value meaning the work cost more than planned
Schedule Variance (SV), schedule variance shows the difference between the scheduled
completion of an activity and the actual completion of that activity. SV is calculated by
deducting planned value from earned value. A negative schedule means it took longer than
planned to perform the work of an activity, a positive schedule variance means it took less time
than planned to do the work. Using the example the SV will be $300 - $600 = -$300 a negative
value meaning it took longer to do the activity that originally planned.

Cost Performance Index (CPI), is the ratio of earned value to actual cost and is used to estimate
the projected cost of completing the project. A CPI equal to one or 100% means the planned and
actual costs are equal or the costs equal the budget. A value of less than 1 or less than 100%
means the project is over budget, if the CPI is greater than one or more than 100% then the
project is under budget, a valuable indicator to know if the project budget is being used as
planned and helps the project manager avoid surprises at the end of the project. Schedule
Performance Index (SPI), is similar to the CPI, is used to estimate the projected time to complete
the project. A schedule performance index of one or 100% means the project is on schedule, a
value greater than one or higher than 100% means the project is ahead of schedule, a value of
less than one or less than 100% means the project is behind schedule.

BUDGET ANALYSIS:

Identify the causes for the deviations from plan. Major deviations from the budget baseline need
to be analyzed to determine what caused the difference so that steps can be taken to prevent the
situation from happening again in the future, or with similar projects. Forecasting, Earned Value
enables the project manager to forecast the probable final cost and schedule results of the project.
With Earned Value, the project does not have to wait until it is almost complete to know that it
has a cost problem. Earned Value gives a project manager an “early warning” signal in time to
take corrective action, in time to influence the final results by taking corrective actions.

What if Scenario Analysis, Scenario analysis uses mathematical models to aid the project
manager get results based on different alternative situations; a project manager can use a
spreadsheet and to place different values to determine the impact on the budget for different
situations that range from increasing personnel to reduce the time to complete the project, to the
implications for the project budget based on currency fluctuations.

BUDGET UPDATE:

Budget Changes: Updates to the budget come from approved changes to the budget. For most
projects changes to the budget need to be approved by the donor, in some instances the donor can
give the project a small percentage that the project can use to cover small budget modifications.
In other instances the donor may have strict limitations to allow budget changes, for example the
donor may specify that any unauthorized project expenses will not be covered by the donor and
leaving the organization with the responsibility to absorb those charges. It is important that the
project manager understands the donor contract clauses and monitors, with special attention the
accounts or budget items that have restrictions. Not doing so may result in losses to the project
and the organization.

Other types of changes comes from causes external to the project that may limit the activities or
work it needs to perform. Civil unrest or another critical event may cause the cancellation of
project activities, in this case the project manager may request that the funds originally budgeted
to that activity be reallocated to another activity that the project can still work. Other changes
come from the donor which may reduce the original project budget or changes caused by
currency fluctuations that impact the funding available to the project. Approved changes to the
budget will need to be reflected in the accounting system used by the organization and new
project budget reports will need to reflect this change.

CORRECTIVE ACTIONS:

Some project may include a predefined limit by which a project may be under or over budget
during the project implementation phase, it is usually set as a small percentage of the total, if the
project is above the defined limit then the project manager needs to take corrective actions to
bring the budget back on track, these actions may include trade-offs that will need to be
discussed with management and the donor, trade-off include reducing the scope or lowering the
quality.
Corrective actions may include the use of alternative options to produce the similar output using
different inputs, the project manager will implement the corrective actions and monitor their
performance to see if they are effective in reducing the project expenses and help bring the
project back on track. Corrective actions need to be consulted with the project team and the staff
in charge of the activities so that changes are implemented.

CAPTURE LESSONS LEARNED:

The lessons can apply to the remainder of the project activities or two future projects. For
example, the initial estimates used to develop the budget may have used wrong assumptions
about the time it takes one person to collect beneficiary data or poor road conditions increases
the costs of vehicle maintenance. The lessons captured need to be written as action steps that the
project will monitor and evaluate in the next reporting period. It makes no sense for a project to
capture lessons if the lessons are not used.

COMMUNICATE CHANGES:

Changes to the budget need to be communicated and incorporated in the system that track cost
performance. Communicating the changes of the budget to the people that will use the
information helps reduce the chances that the work will be done on activities that have been
either cancelled or postponed.
CHAPTER-IV
DATA ANALYSIS AND INTERPRETATION
.

1. Age of the employee?

S.No Age limit Employees response % of respondents 1 21-40 48 48 2 41-50 44 44 3
Above 50 08 08 Total 100 100