MANAGING A BUSINESS
What is a budget?
A budget is an agreed plan establishing in numerical or financial terms the policy to be pursued and the anticipated outcomes of that policy.
Budgets are usually stated in terms of financial targets, relating to money allocated to support the organisation of a particular function. They also include targets for revenue and output or sales volume.
There are three types of budgets
· Income budget –this show the agreed planned income of a business or division of a business over a period of time. It may also be described as a revenue budget or sales budget.
· Expenditure budget- this shows the agreed planned expenditure of a business or division of a business over a period of time.
· Profit budget – this shows the agreed, planned profit of a business or division over a period of time.
Benefits of using budgets
Drawbacks of using budgets
To provide direction and co ordination by ensuring that spending is geared towards the firms aims
If budgets are too ridged things could go wrong
To assign responsibility for the success or failure
Incorrect allocations a budget that is too generous may encourage inefficiency.
To motivate staff and set targets
A budget that is insufficient could demotivate staff
To improve efficiency by investigating reasons for failure and success
Poor communication could lead to non compliance
To encourage forward planning by studying possible outcomes
- Created by: m aureen johnson
- Created on: 31-03-13 19:18
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