Using Budgets

Improving Cash Flow

Measuring and Increasing Profit

  • Created by: Hannah
  • Created on: 09-12-10 15:50


Benefits:      Controlling Finances; budgets allow a business to control expenditure, which would decrease the chance of over spending. It allows money to be specifically allocated to areas of the business which are in need of it.

Improving staff performance; people like being given reasonable and agreed objectives to work towards, they gain satisfaction from being trusted with responsibility, this motivational impact may encourage workers to keep within budgets.

Drawbacks;  Depts. may compete for bigger budgets, but those who need the money may not get it.

Making cuts in the short-term to fit budgets may lead to long-term problems.

If targets are too ambitious and staff cannot achieve them, it may have a negative effect on motiviation.

For staff to gain motivation from using budgets, they must be involved in setting them up.

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Variance is the difference between a budgeted figure and the actual figure achieved

Variance analysis is the comparison by an organissation of its actual performance with its expected budgeted performance over a certain period of time.

It can be either favourable or adverse.

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Improving Cash flow

Causes of cash flow problems

Lack of planning

Poor credit control (bad debts)

Allowing too long to pay debts


Unexpected events

Ways to improve cash flow

Increase cash inflows

Reduce cash outflows

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Improving cash flow

Increasing cash inflows

Over draft

Loan (short or longterm)

Sale of assets

Sale and leaseback


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Measuring and Increasing profit

Profit and profit margins

profit= Total Revenue- Total costs

Gross Profit= Sales revenue- variable costs

Net Profit= Sales Revenue- Total costs

Gross Profit Margin (%)

               gross profit          

                  sales revenue         X 100

Net Profit Margin (%)

              net profit

             sales revenue       x100

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really useful =D

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