Budget: a financial plan covering expenditure and all aspects of cost and revenue over a period of time.
Income budget: + sets sales targets; forcasts income from sales expected over period of time
Expenditure budget: shows level of forecast firm is expecting to incur + controls expenditure +allocates money and helps plan.
Profit budget: forecast amount of profit + motivates staff
Variance Analysis...is a process of calculating variances and attempting to establish what has caused them and the efffect of profit.
Variance is the difference between actual financial outcomes and those predicted.
Variance = Budget figure - Actual figure
Favourable variances: differences between actual and budgetted figure will result in higher profits than predicted
Adverse Variances: differences result in firms profits being lower.
disadvantages of budgets
- staff may not have the skills to set budgets resulting in errors
-difficult to allocate effectively
-long term implications - only allocated yearly
-problems with agreeing with targets
-time consuming process
causes of cashflow problems: overtrading - expands too quick and lack of funds. Too much trade credit - too generous on trade credit. Poor credit control
1. Business supllies customer with goods/services.2.business sells debts to factor. 3.factor initially pays approx 80% value debts 4.customer pays factor full value of debt due. 5. factor pays business remainder of debt when collected from customer at 5% charge.
cashflow and business performance.... reduces borrowing costs, good relations with suppliers and public relations
Improved control of working capital.. negotiate improved terms of trade credit..offer less trade credit...debt factoring..arrange short term borrowing....sale and leaseback.
overdraft: flexible loan on which business can draw as neccessary up to an agreed limit.
trade credit: offered when purchasers are allowed to have a period of time (60-90 days) where they pay later.
creditors: those who a business owes money to for goods/services they have been delivered but not paid for
debtors:those who owe.
ORGANISATIONAL STRUCTURES: way a firm organises ac
Tall structure: many levels
Flat structure:few levels
Centralised- authority kept at senior level + easier to implement policies,keep control,cost savings,better decision making and act quicker in crisis.
decentralised - auhority widely dispersed. + decisions made close to market/customer, flexible, reduce workloador senior management - conflict, individual stress/lack of skills.
Delegation - passing authority down. + increases staff motivation/skill, management are free from workload - staff can abuse trust. anxiety.
internal/external/ 1 way/2 way/formal/informal