Analyse the Reasons Why Costs Need to Be Controlled to Budget

In: Business and Management

Submitted By rickyrai11
Words 1318
Pages 6
Unit 5 Introduction to Accounting D1
L & S Ltd

When experiencing cash flow problems there are a few recommendations to make, these problems include:

• Being overdrawn on consecutive months. • Having too much money • Difficulty in predicting costs

When being overdrawn on consecutive months you should look to cut back on immediate expenses such as insurance, suppliers, rent and employees. You could also increase product prices however you have to bare in mind whether the customers will pay that little bit extra to pay for the product. Another option, but more risky, is to gain more credit from creditors but this will bring interest costs and adds another liability for the future.

When having too much money in a cash flow you should reinvest the capital back into the business in order to advance in technology, assets or staff. This will help the company move forward and improve the service offered to consumers. Another option is to put the money in a savings account, premium bonds or shares. This will provide more interest on your money and let it grow instead of letting it just sit around gathering dust.

The final problem, difficulty in predicting cash flow costs, should be resolved by asking your sale assistants, doing market research or asking an experienced accountant for guidance. You should ask your sale assistants because they are the people on the ground floor and know what’s going on, what the customers like and what products fly off the shelf. They have first hand knowledge on the company as they process the day to day dealings whereas a manager might not always be around. Doing market research will help to find the average prices of all products or services such as insurance, this will ensure you will get the best quote and avoid under predicting the costs for that month. Just to be certain, you can then go and ask an accountant…...

Similar Documents

Who Needs Budgets?

...In the article “Who needs budgets?” published in Harvard Business review in February 2003 the authors J. Hope and R. Fraser try to answer the question why companies are still bound to budgeting, while they are improving their financial processes, implementing activity based costing, and heading to flexible decentralization. The authors consider extreme focusing on budgets to be problematic for any company. First of all, there were lots of examples when companies were trying “to improve” the numbers in order to meet the budget what lead to bankrupts instead. Besides, companies that depend too much on their budgets are not flexible to respond to market developments. Moreover, budget approach takes into account too many details, so it is really complicated, takes up to 30% of management’s time and costs company millions of dollars. In order to support their point of view the authors discuss two companies who decided to stop using budgets: Svenska Handelsbanken and Ahlsell. Both companies succeeded incredibly after getting rid of budgeting system. In general, companies will be able to create a self-motivated and adaptable workforce only if they find alternative way to budgeting process. It will be possible to start planning on a day-to-day basis, instead of endless budget regulations. In my opinion, the non-budgeting ways to control the costs which were discussed in the article could be really helpful in my former organization. Budgeting in our department was always hard......

Words: 290 - Pages: 2

Analyse the Reasons Why Costs Need to Be Controlled to Budget

...M4 - Analyse the reasons why costs need to be controlled to budget? Introduction: For this task I will be analysing the advantages and disadvantages about the business that Brad owns which involves transporting business people to and from airports using luxury cars and limousines. Addition to this I will also be explaining what the words budget, fixed, variable and total costs mean. One of the main topics that I will be covering is the fact that if Brad does nothing with his costs what the implication would be on the business as well as him and what encounters it will have. Budget: So what is budget? Budget is a financial document which is used to project future income and expenses. Budgeting is used by everyone who owns a business whether it’d be a large or small business; it is a crucial part of the finance side of the business. The process may be carried out by individuals or by companies to estimate whether the company is keeping within their budget and not over spending. The process for preparing a monthly budget includes: * Listing of all sources of monthly income. * Fixed expenses such as rent/mortgage, utilities, phone bills. * Listing of other possible and variable expenses. A business will always choose how much they are to spend on their resources etc from their budget which is calculated when the business starts. A budget may be prepared simply using paper and pencil, or on computer using a spreadsheet program like......

Words: 1205 - Pages: 5

Ten Reasons Why People Life Need to Get Better.

...This step results in isolating the x on one side of the equation. x + 2 = 5 x + 2 ( 2) = 5 x = 3 ( 2) x + 0 = 3 Given equation Add -2 to each side. Addition of real numbers Additive identity ISBN 1-256-49082-2 Beginning and Intermediate Algebra with Applications & Visualization, Third edition, by Gary K. Rockswold and Terry A. Krieger. Published by Addison Wesley. Copyright © 2013 by Pearson Education, Inc. 92 CHAPTER 2 LINEAR EQUATIONS AND INEQUALITIES These four equations (on the bottom of the previous page) are equivalent, but the solution is easiest to see in the last equation. When 2 is added to each side of the given equation, the addition property of equality is used. ADDITION PROPERTY OF EQUALITY READING CHECK • Why do we use the addition property of equality? If a, b, and c are real numbers, then a = b is equivalent to a + c = b + c. That is, adding the same number to each side of an equation results in an equivalent equation. NOTE: Because any subtraction problem can be changed to an addition problem, the addition property of equality also works for subtraction. That is, if the same number is subtracted from each side of an equation, the result is an equivalent equation. EXAMPLE 1 Using the addition property of equality Solve each equation. (a) x + 10 = 7 (b) t - 4 = 3 (c) 1 = - 3 + y 2 4 Solution (a) When solving an equation, we try to isolate the variable on one side of the equation. If we add - 10 to (or subtract 10 from)......

Words: 32187 - Pages: 129

Reasons Why Managers Need to Be Acquainted with Programming, Web Source Code, and Technology.

...benefits and limitations (Meyers, 2011). The explosion of technology has led to an economic globalization where the transmission of information is no longer limited by space and time. Managers must continually utilize this flow of information efficiently to maximize their performance. In conclusion, in a technology fueled economy, it’s apparent that a manager must be tech-savvy if they want to remain marketable and beneficial to whichever organization they serve. REFERENCES Ebrahimi, Alireza (2005). Why Managers Should Become Better Acquainted With Programming Issues, Web Source Code, and Technology?, The International Journal of Applied Management and Technology, Vol 3, Num 2, 1. Berkun, Scott (2010). Should managers know how to code? Meyers, Andrew (2011) Managers Need to Keep Up With Changing Technology.

Words: 490 - Pages: 2

M4-Analyse the Reasons Why Cocts Need to Be Controlled

...M4-Analyse the reasons why costs need to be controlled to budget. In my report I’m going to analyse the reasons why costs need to be controlled and why businesses set budgets as targets or limits. I am also going to use the figures from the income and expenditure for the business Hairliners and going to explain the reasons why Headliners needs to use a budget to control their costs. Costs and budgets need to be controlled in order to know what is received and spend. For instance, if costs and budgets are not controlled when running a business, then it will run the risk of spending more money than it is taking or not spending enough money to grow the business and compete. The reason organisation needs to control their costs properly would be that it would end up saving money on expenses and increase its revenue. This will help the company to increase its revenues and this would allow the company to invest more money if required. The business should control its costs so that it saves money and by having the right amount of stock the business can then have the full benefits of selling those stocks and receiving cash which could be used for other areas of the business or buy more stock if they are confident they can sell it all. A budget divides your expenses into overhead and production costs. Overhead costs are operating expenses such as phones, insurance, marketing and rent. If you don’t know your overhead and production costs for each unit of a product you produce you......

Words: 985 - Pages: 4

13 Reasons Why

...specifically why my life ended. And if you’re listening to these tapes,you’re one of the reasons why: I’m not saying which tape brings you into the story, But fear not,if you received this lovely little box,your name will pop up… I promise. The rules are pretty simple. There are only two. Rule number one: You listen. Rule number two: You pass it on. Hopefully,neither one will be easy for you. When you’re done listening to all thirteen sides-because there are thirteen sides to every story-rewind the tape,put them back in the box and pass them on to whoever follows your little tale. And you,lucky number thirteen,you can take the tapes straight to hell. Depending on your religion,maybe I’ll see you there. In case you’re tempted to break the rules,understand that I did make a copy of these tapes. These copies will be released in a very public manner if this package doesn't make it through all of you. This was not a spur-of-the-moment decision. Do not take me for granted…again. You are being watched. I almost forgot. If you’re on my list,you should’v received a map. Throughout the tapes,I’ll be mentioning several spots of our beloved city for you to visit. I can’t force you to go there,but if you’d like a little more insight,just head for the stars. Or,if you’d like,just throw the maps away and I’ll never know. Or maybe I will. I’m not actually sure how this whole dead thing works. Who knows maybe I’m standing behind you,right now. CASSETTE 1: SIDE A REASON 1:......

Words: 2752 - Pages: 12

10 Reasons Why We Don’t Need Gm Foods

...10 REASONS WHY we don’t need GM foods With the cost of food skyrocketing – hitting not just shoppers but the poor and hungry in the developing world – genetically modified (GM) foods are once again being promoted as the way to feed the world. But this is little short of a confidence trick. Far from needing more GM foods, there are urgent reasons why we need to ban them altogether. 1. GM foods won’t solve the food crisis A 2008 World Bank report concluded that increased biofuel production is the major cause of the increase in food prices.1 GM giant Monsanto has been at the heart of the lobbying for biofuels (crops grown for fuel rather than food) — while profiting enormously from the resulting food crisis and using it as a PR opportunity to promote GM foods! “The climate crisis was used to boost biofuels, helping to create the food crisis; and now the food crisis is being used to revive the fortunes of the GM industry.” — Daniel Howden, Africa correspondent of The Independent2 “The cynic in me thinks that they’re just using the current food crisis and the fuel crisis as a springboard to push GM crops back on to the public agenda. I understand why they’re doing it, but the danger is that if they’re making these claims about GM crops solving the problem of drought or feeding the world, that’s bullshit.” – Prof Denis Murphy, head of biotechnology at the University of Glamorgan in Wales3 commercialization, genetic engineering has failed to significantly increase US crop......

Words: 2312 - Pages: 10

M4; Why Do Budgets and Costs Need to Be Controlled

...will need to show proof that it is you and credit records so they know that you will pay them back on time. Advantages of a Bank Loan: * Convenient and accessible- Banks are always accessible since they are used regularly for depositing savings or withdrawing them. After being bank customers for years, the bank becomes convenient and familiar, and personalized service makes it the first place to consider for a loan. * Multiple Loan options- All banks advertise various types of schemes to woo entrepreneurs setting up or running a business. The real earnings for a bank come from the interest they charge on these loans. Options like term loans, standard business loans and others are available for the entrepreneur. * Non profit sharing- Venture capitalists and angel investors agree to provide a loan in exchange for part ownership, the right to influence decision making and a share of the profits. Banks do not ask for any of these. If they do sanction a loan, they are only interested in getting their interest and partial loan payment instalments. * Lower rates of interest-Though tough to get, banks provide loans at lower rates of interest than other lending agencies and instruments like credit cards. * Bank loans offer tax benefits- Small businesses taking loans from banks enjoy some relief from tax, since the percentage of profits used to repay the loan is exempted from tax. Disadvantages of a Bank Loan: * Lengthy application process- banks need to......

Words: 2853 - Pages: 12

Accounting- Cost Behavior, Cost Allocation, and Budget

...317 Introduction Costs are linked with all types of organizations- business, nonbusiness, manufacturing, retail and service. Cost behavior, Cost accounting & allocation, and Budget- these are the three key requirements to run any business nowadays. Measuring cost behavior (cost measurement) is associated with understanding and calculating how activities of an organization affect different levels of cost. On the other hand, cost accounting is a kind of accounting method that targets to capture an organization’s costs of production by evaluating the input costs of each step of production as well as fixed costs. Then, cost allocation is the allocating of a common cost to several cost substances. Additionally, budget is an estimate of earnings and expenses for a set period of time. These are commonly used terms in financial accounting information as well as in any business. My company is called The EBag Co. Ltd, which is in business for more than 5 years in the production sector of the market. This profitable business is earning its profits by manufacturing affordable bags for consumers of all ages. My company will use these three requirements of this assignment to make business more profitable in coming days. I will use the five methods (will talk about only 3) of measuring cost function for my company to identify which costs will change and which will remain the same with changes in sales volume. Then, I will use cost allocation chart to help me to......

Words: 2670 - Pages: 11

Analyse the Possible Reasons Why Kevar Travel Plc. Wished to Make Its Workforce More Flexible? (18 Marks)

...There are several possible reasons for why Kevar Travel Plc would benefit from a flexible workforce. Flexible workforces exist when businesses place less reliance upon permanent full-time employees and make greater use of part-time and temporary workers. Implementing a core and peripheral strategy is one way to make the workforce more flexible. This is because it allows them to gain a core of skilled workers which are all kept on permanent full time contracts which keeps them motivated and secure within the company so they stay which is beneficial as it means lower levels of having to train to high levels. The peripheral aspect of the strategy allows them to hire when necessary whether its unskilled staff to account for increased demand or highly skilled staff for specialist problems. This is beneficial as it means they don’t have to employ all their staff permanently whilst still allowing them to respond to the flucations in demand for cheap holidays. Kevar Travel Plc has seen a high degree of fluctuation with demand for its product. This is due to seasonal demands, competitive power from rivals and also consumer tastes and fashions regarding holidays over recent years. A strategy that was proposed was to make the workforce more flexible. One way in which they implemented this is the relocation of head office from London to Stoke. They would then go on to create a new workforce plan, which would achieve more flexibility within the workplace, this was done......

Words: 850 - Pages: 4

Budget Cost

...It helps you keep your eye on the prize. A budget helps you figure out your long-term goals and work towards them. If you just drift aimlessly through life, tossing your money at every pretty, shiny object that happens catch your eye, how will you ever save up enough money to buy a car, take that trip to Aruba or put a down payment on a house? A budget forces you to map out your goals, save your money, keep track of your progress and make your dreams a reality. OK, so it may stink when you realize that brand new shoot 'em up Xbox game or the gorgeous cashmere sweater in the store window doesn't fit into your budget. But when you remind yourself that you're saving up for a new house or school, it will be much easier to turn around and walk out of the store empty-handed. It ensures you don't spend money that you don't have. Far too many consumers spend money they don't have -and we can owe it all to credit cards. As a matter of fact, the average credit card debt per household reached $8,329 in 2008, according to an April 2009 Nilson Report. Before the age of plastic, people knew if they were living within their means. At the end of the month, if they had enough money left to pay the bills and sock some away in savings, they were on track. These days, people who overuse and abuse credit cards don't always realize they're overspending until they're drowning in debt. However, if you create and stick to a budget, you'll never find yourself in this precarious position. You'll......

Words: 372 - Pages: 2

Reason Why

...I think the reason why HUM115, Critical Thinking is offered at Davidson Community College because critical thinking to be purposeful, self-regulatory judgment which results in interpretation. As it right now, I am using critical thinking to write this forum. Asking myself questions on how to start this forum? What should be added on? Critical thinking can be used to take charge of student’s daily life. As students can learn to think more critically, as they become more proficient at historical, scientific, and mathematical thinking. We as students can develop skills, abilities, and values crucial to be success in everyday life. Like in the textbook says, “To think critically, people must be willing to examine their thinking and put it to some stern tests.” Critical thinking is important in our everyday life. Students can use critical thinking to solve problems or answer questions. Basically, students uses critical thinking every day at school. I’m attending Davidson Community College for my Associates in Medical Assisting and I know I will be using a lot of critical thinking in the health field. Every moment of my life, I use critical thinking about my problems and issues. This online class is my first online class ever. I have never attended online classes before. I do not know what to expect but just to make sure I do my assignments online and checking my Moodle and email to make sure I am on track. Online class students have more time to reflect on responses and practice......

Words: 431 - Pages: 2

Analyse the Cost of Risk

...PROGRAMME : RISK MANAGEMENT AND INSURANCE Analyze the cost of risk The existence of risk and the nature of it being the state of the word, “risk” is associated with everything we do in life. This in the today’s world, business risk and the ability to quantify that risk in monetary form is proving to be of equal importance. Therefore, any risk manager’s core objective is to manage enterprise wide risk, leading to a fall in total costs associated with risk exposures. Due to these factors cost of risk has taken form, showing the dollar value of managing these risks and ways of reducing, preventing and controlling them effectively The concept in cost of risk was introduced by, a risk professional named Douglas Barlow in the late 1959 to 1972. This concept in his view was like a formula for all the factors related to management of risk. Ultimately the cost of risk was then defined by disintegrating it into four basic components which makes up the structure of the concept namely the cost of actual losses sustained, cost of measures for loss prevention, insurance premiums, and administrative expenses. In short the above elements make up the formula for cost of risk. COST OF FUNDING LOSSES As one of the major element in cost of risk, which is widely used and tracked is the insurance premiums. Which is associated with spending on insurance coverage and paying up......

Words: 1736 - Pages: 7

2.08 Why Budget

...02.06 Budget Worksheet 17,675 Your Chosen Career: Emergency Room Nurse Yearly Budget|Gross Income|Net Income (after taxes)| |$65,000|$48,750| Housing |Yearly Cost| Mortgage or rent|$9,000| Maintenance or repairs |$0| Supplies |$120| Home Insurance |$0| Furnishings |$600| Subtotals|$9,720| Transportation |Yearly Cost| Vehicle Payment |$0| Bus/Taxi Fare |$480| Automobile Insurance |$0| Licensing |$0| Fuel |$0| Maintenance |$0| Other |$0| Subtotals|$480| Food |Yearly Cost| Groceries |$1,800| Dining Out |$200| Subtotals|$2,000| Pets |Yearly Cost| Food |$0| Medical |$0| Grooming |$0| Toys |$0| Other |$0| Subtotals|$0| Savings or Investments |Yearly Cost| Retirement Account |$2,000| Investment Account |$1,000| Emergency Savings |$1,000| Subtotals|$4,000| Your Name: Total Yearly Expenses|$39,030| Difference (net income minus expenses)|$9,720| Entertainment |Yearly Cost| Video/DVD |$0| Vacation |$0| Other |$0| Subtotals|$0| Other Credit Debt |Yearly Cost| Student Loan |$20,200| Credit Card |$300| Other |$0| Subtotals|$20,500| Utilities |Yearly Cost| Phone and/or Cell Phone|$480| Cable and Internet |$0| Electric and Gas |$600| Water and Sewer |$0| Waste Removal |$0| Subtotals|$1080| Personal Care |Yearly Cost| Health Insurance |$600| Other Medical Costs |$100| Hair/Nails |$50| Clothing & Laundry |$300| Health Club |$0| Organization Dues or Fees |$0| Other ......

Words: 485 - Pages: 2

You Need a Budget

...You Need a Budget By Shawn Power I’m a person that is not good with budget any bills, so when it comes to pay bills I have to team up with my wife to get all the paper work together to get all the bill in order to make sure all the bills are paid. So when I seen this article on a program called You Need A Budget or (YNAB) I had to stop an read the article it amazed me how the program only cost 60$, and if your hesitant on purchasing the program you can down load the demo for 34 days with all the features open to use. My wife and i decided to give the program a try and to our amazement it was very simple to use putting all of our bills on the YNAB and to see how much we were paying a month. You can even load the program on your cell phone if you have the android market and down load it to your phone. With having it on your phone you can even sync it to your desktop computer or laptop application for entering any purchases you have made at that moment. That’s great because your basically budgeting your money knowing how much you have spent and have left in your back account at that moment. For any male out here in the word budgeting is the last thing you want to do especially if you use your credit or debit card and the cashier hands you back your card telling you that you have been declined. An then you have to wonder what happen to all of your money, because you have just gotten paid and if you go home your wife or girlfriend is going to be mad because you have spent all your...

Words: 348 - Pages: 2