BUDGETING

Part 9

Starter

What is a budget?

Why do we use them?

Lesson Objective

To be able to describe the purpose of budgeting.

Your Budgets…

You have been given the information necessary to plan for either a Football team or your dream wedding.

Using the budget provided, spend!

Share your reasons with your partner.

Sophie’s dreaming again…

A budget is a plan of money coming in and going out over a period of time!

If Sophie wants her dress, she just needs to set out her budget and stick to it!

Activity 1 – Sophie’s Budget

Using the sheet, answer the following questions:

Budgets in a Business

A business has much more income and spends more money.

It still needs budgets though – why?

Its main source of income will be from _________.

A sales budget is required to plan the number of sales each month and the income from those sales.

SALES

Activity 2

1. Do you think the figures above are for an ice cream manufacturer or a toy manufacturer. Explain you answer.

2. The sales manager could give these figures to his salesman as “targets” for them to meet. How could this benefit the business.

Month Aug

Sept

Oct

Nov

Dec

Jan

Forecast sales income £000s

40 50 70 100 150 70

Activity 3 – Other types of budgets

Now we know the expected sales figures, this will help the business plan other budgets too.

Using the following words, please fill in the gaps on your sheet:

Capital expenditure

Labour

Purchase

Cash

Marketing

Answers

1. The _______ budget – if we know what we are likely to sell, we can work out what we

need to buy each month.

2. The _______ budget – if we are making goods, we can work out how many people to

employ and what the labour costs will be.

3. The ________ budget – when our sales are expected to be low, this tells us we need to

do more advertising in the months before this. This helps us plan our marketing.

4. The _______________ budget – if our sales are very high we might need to buy big items

like new premises, vans or machinery. This will help us work out how and when to pay

for these items.

5. The ______ budget – if we know our income (from the sales budgets), and our likely

spending (from all the other budgets), we can work out how much cash we are likely

to have each month.

purchase

labour

marketing

Capital expenditure

cash

Budgetary Control

A business needs to continuously check its performance against its planned budgets!

Budgetary control = checking performance against a plan.

Using it effectively will allow you to see where you are spending too much or not enough and make corrections as needed!

It is important so that you can see if there is a problem in advance and do something about it!

And to finish…To be able to describe the purpose of budgeting.