Please enable JavaScript.
Coggle requires JavaScript to display documents.
setting budgets (pros and cons of historical budgeting (pros:, historical…
setting budgets
-
-
advantages of budgets:
-
-
income and expenditure budgets are used to motivate staff by acting as a target. if budgets are realistic employees do their best
-
-
variance analysis: process of monitoring budgets and investigating any differences between forecasts + actual figures
-
-
if plans go wrong e.g. less revenue than expected or higher production costs then action is required
-
business plans
-
meaning it will be easier to judge whether the business idea is viable- and lenders can assess if it is worthwhile investing in the business
-
-
historical budgeting: involves using the previous year's budget and updating it with minor adjustments for inflation and other foreseeable changes
-
-
adverse varience: is where the difference between an actual and budgeted figure will cause profits to be lower
favourable variance: is where the difference between an actual and budgeted figure will cause profits to be higher
delegating budgets:
senior managers often delegate budgets. this means that they allow individual managers to control and take responsibility for their own budgets