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Setting Budgets Candidates should be aware of
· income, expenditure and the reasons for setting budgets
profit budgets and the problems in so doing.
· the process of setting budgets Candidates should be able to
· problems in setting budgets. amend or complete a budget.

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A budget = A financial plan for the future concerning the revenues and costs of a

Setting budgets is a key part of management and financial control for a start-up

Budgeting is:
­ A part of business planning
­ About allocating limited resources
­ Used to monitor performance…

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Sales Budget
· Putting a sales budget together is often hard for a start-up
­ Perhaps no experience of the market
­ No existing customers or sales history
­ Have to predict sales volumes and prices
· Sales budget needs to take account of market research
­ Realistic view on…

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Expenditure Budget
The expenditure budget is a vital part of planning a start-up because:
­ Business likely to incur costs before it starts trading
­ Need to ensure it has sufficient cash to pay for the costs
­ Poor control of costs may lead to business failure

Ideally, the expenditure…

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Expenditure Budget
Here is an example of an expenditure budget

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Profit Budget

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Methods of Setting a
Remember that we are dealing with start-ups in BUSS1
­ Entrepreneur has many other things to do
­ Limited time and resources
­ Not possible to look at what happened last year!

Budget should be integrated with overall process of business planning

Tips for a…

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Disadvantages of Budgets
Budgets are based on estimates and assumptions ­ actual results always turn out

Start-ups have no trading history

Setting and monitoring budgets takes time ­ it shouldn't get in the way of building
the business

Limited motivational effect, particularly if the start-up doesn't have any employees…

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Exam Tips
Remember that, for the start-up entrepreneur, the time spent setting and
monitoring budgets has an opportunity cost. Three days working on a budget
spreadsheet could be spent instead on visiting customers, training staff or
developing new product ideas.

As a result, an effective budget system for a start-up…


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