a) Factoring is an outsourcing service that our company could use when required to choose to use an

external sources, in order to retrieve the receivables. This type of service also takes up commission or a
part of the money collected as a charge. There are different types of these services that our company
could choose, for example, where the factoring service comes with bad debts responsibility and the
service where this is not included. In this scenario, we can see that the total factoring cost comes up to
T$1,280,000. Its financial cost includes tender price, service agreement administration costs and
redundancy costs.

The advantages of debt factoring is that improves the cash flow on the company, it helps in regular cash
flow required for working capital in day to day of business. We can keep in check with the cash flow in a
proper cycle, hence balancing the cycle properly.

It also helps in saving resources, as we do not have to waste our time and energy over these receivables
when the factoring services are devoted to do these instead. Therefore we can focus this resource
somewhere else optimally. It saves time, as the factoring agreements are usually very conditional and
precise. They ought to do their work.

It’s a quicker way to obtain financing compared to other forms of financing.

It helps accelerate growth with good cash flow in the business, thus leading to a good amount of growth
if everything else in our company went smoothly.

It helps in paying back to the suppliers since cash flow functions smoothly.

The disadvantage of factoring for our company could be that it will reduce our profit, since the fees is up
to certain agreements made.

It might also sever our ties with our customers, as the factoring services might use all the methods to get
the cash flow back.

We might lose customers, as some of them might not like the method we chose.

b) The relevant costs are those costs which are relevant for decision making. These costs are
incremental in nature as our company will keep on making decisions in favor of the company’s
objectives. These costs are future costs that have yet not been made.

The tender price would be a committed cost and is irrelevant as it has already been agreed.

Redundancy is a relevant cost as the decision between the two plans will raise the need of redundancy.

The service agreement administration

c) Beyond budgeting is a concept in budgeting. This involves rolling budgets prepared in every quarter or
month with the use of KPIs to understand the progress of the business. It gives the managers power and
responsibility to plan budgets. If we choose this budget, our company will be able to understand the
process in a much better way because the rolling budgets take account of current market conditions to
prepare new ones. It encourages the managers as it gives them more responsibility and importance in
the part of the company’s growth. This type of budgeting will completely ignore the past mistakes and
start with a clean slate every time and will focus more on future. The completion is actually enhanced
more with external competitors rather than the internal factors. The managers are also given
commission according to their progress. The use of KPIs is very essential here. There are scoreboards
help us understand everything better. We can forecast the demand and sales in much accuracy. The
disadvantages would be, the managers might create a budgetary slack. They might not conduct in the
way of the company’s objectives. Overall beyond budgeting would be great to implement.

52 mins