FINANCIAL MANAGEMENT AND HUMAN RESOURCE PLANNING AND BUDGETING

Financial Management and Human Resource Planning and Budgeting

Financial Management and Human Resource Planning and Budgeting

Introduction

This report sheds light on the introductory issues of financial management and human resource planning and budgeting processes. In this regard, a case regarding LJC company is evaluated and analyzed to assess the payback time period of a new project, estimation of future staffing requirement in pack house and ware house for the next five years, Human resource issues, ethical working practices, Human resource budget, estimation of cost per employee for induction, and demonstration of various alternatives or plans to cancel out the effects of initial costs by long term benefits.

Project Summary

LCJ White operates as a distributer of fruit and vegetables. It works with small retailers. The business is solely run by family. The company is interested in doing business with Co-share that runs a chain of small supermarkets. Co-share is a company that follows ethical practices and has firm grip on fair trade practices. The company also prefers that their all contractors follow similar approach of fair trade products and implements bets HR practice policies, develop employees skills, and do not discriminate among employees.

As a result of acquiring this project, LCJ White has to expand its company's operations and invest in new machineries. The company must plan to formalize and standardize its human resource operations and practices.

Discussion

Payback Period

The initial cost associated to the project is calculated to be £950,000 and as per the estimation of finance manager, the cash inflow generated out of the project is estimated to be £65,000 per month. The target rate of return in this regard is estimated to be 15% per year. The payback method estimates the time required to recover the cost or investment associated to the project. This approach helps in determining the potential of investment. It is one of the simplest methods. The answer is usually expressed in terms of time. The payback period is calculated by sing the following formula:

Cost of project / Annual cash revenues = Payback period

One of the limitations of payback period is that it does not consider the time value of money, risks associated to finance and opportunity cost. But, it's a simple method to evaluate the investment decision pertaining to a project (Sangster, 1993, pp. 307-332).

The payback period of the given project is estimated below:

Months

Cash Outflow

Monthly Cash inflow

Amount Owed

No. of months

0

950000

 

950000

 

1

 

65000

885000

1.073446328

2

 

65000

820000

1.079268293

3

 

65000

755000

1.086092715

4

 

65000

690000

1.094202899

5

 

65000

625000

1.104

6

 

65000

560000

1.116071429

7

 

65000

495000

1.131313131

8

 

65000

430000

1.151162791

9

 

65000

365000

1.178082192

10

 

65000

300000

1.216666667

11

 

65000

235000

1.276595745

12

 

65000

170000

1.382352941

13

 

65000

105000

1.619047619

14

 

65000

40000

2.625

 

Payback period in months

15.50830275

 

Payback period in years

1.292358562

Estimation of future staffing requirement

The workforce plan is a systematic approach that helps in determining the difference between the existing and future human resource requirements. The employees of an organization are considered as an asset of the company. It is necessary to hire or place a right employee, at right time and right designation to control the cost of organization and fulfilling the staffing requirement. A company having high turnover will require to keep on hiring the needed employees to fill the vacancies but this factor significantly affect the overall human resource budget of the ...