Using budgets: A budget is a series of prediction, assumptions, limitations and goals of the financial aspect of a business for a set period of time. Budgets usually include expected income, revenue, amount of sales, over heads and other costs to the business with the net and gross profit margin for the set period of time.
Why do businesses set up budgets? A business would draw up a budget in order to be able to prioritise certain areas and objectives of the business. It also allows the business to see and potential and recurring problems in the business which makes it easier for the business to asses and correct.
There are 3 different types of budgets;
Income budget; this is an established plan or prediction of the company's income over a set period of time, aims and targets for income are usually included also.
Expediture budget; this is an established plan or prediction of the company's expediture over a set period of time, usually aims and targets for a certain amount of expenditure is inclded
Profit budgets; This is a plan or prediction of the company's profit over a set period of time, aims and targets are usually included within this
Budgets have both their advantages and disadvantages;
Some advantages may be;
- They allow the business to prioritise aims
- Delegated budgets can motivate the workforce…