track/control reveneue/expenditure Flashcards
(27 cards)
importance of tracking/controlling expenditure
•to ensure expenses do not exceed available revenues.
•Optimises budgets
•Maximises tax deductions
•Manages cash flow effectively
•Averts potential financial disasters
why managers need to review their budgets regularly
•recognise patterns,
•check against budgets
•and be financially aware of their own department spend.
importance of tracking/controlling revenue
•Sales levels bringing money in
•Debtors still to pay for goods/services
•Enough to keep business afloat/growing.
BUSINESS risk of poor financial control
‒new product development.
‒effectiveness of product launch.
‒marketing campaigns for new product.
OPERATIONAL risk of poor financial control
‒potential for mismanagement.
‒technical failure/breakdowns.
‒fraud due to lack of controls.
POLITICAL risk of poor financial control
‒change of government.
‒change of priorities.
economic risk of poor financial control
‒recession.
‒inflation.
unforseesble risk of poor financial control
‒extreme weather.
‒pandemics/epidemics.
‒threat/declaration of war.
legal risk of poor financial control
misunderstanding.
‒lack of awareness.
‒reckless indifference.
‒ambiguity in documents/intent.
financial risk of poor financial control
•Credit risk.
•Equity risk.
•Liquidity risk.
•Asset-backed risk.
•Financial markets risk.
importance of budget
•set out the resources needed for business activities in a specific accounting period
•show which department surplus and deficit
•analyse variances and take control
importance of tracking/controlling expenditure
ensure expenses do not exceed available revenues
•See what funds are being spent on.
•Tracks business expenses.
•How much is being spent.
why do managers need to review there expenditure
•recognise patterns,
•check against budgets
•and be financially aware of their own department spend.
forecasting budgets
•Forces management to look to the future.
•Sets detailed plans to achieve objectives.
•Defines areas of responsibility
•Gives the organisation direction and purpose
•set kpi
responsibility center
•Revenue centres: measure revenues only – not compared cost
•Cost centres: measure expenditure only – not applied to revenues.
•Profit centres: measure the difference between revenues and expenditure.
•Investment centres: measure the return on investment (ROI) of assets used to generate revenues.
budget control officer
•Liaises between budget committee and managers.
•Deals with any budget control issues.
•Clarifies results with managers.
•Ensures all deadlines are met.
•Informs/educates on budget control.
budget committee
•senior management
•coordination of budgets.
•Timeline for budget prep/implementation.
•Supply information to assist with budget prep.
budget handbook
•Organisation charts and lines of command.
•Details of the budget setting procedures.
•Account codes for expenditures and revenues.
forecast sales budget
•forecasts in number of units sold and financial values of the sales
considerations
•Previous sales levels.
•Statistical evidence.
•Market research.
•Competitor activity.
forecast production budgets
•planning optimum production levels to fulfil sales orders
considerations
•Plant/machinery utilisation.
•Levels of work-in-progress.
•Additional capacity requirements.
forecast purchasing budgets
•the acquisition of the materials to produce the goods for resale
considerations
•Raw materials/components required.
•Production targets.
•Stock levels held.
forecast workforce budgets
•plan the labour requirements of the organisation
considerations
•Production targets.
•Staff hours available.
•Skills/operatives required.
forecast cash budgets
•actual cash plan of the business over an accounting period.
•Identify cash requirements throughout.
•Summarise monthly revenues/expenditure.
•Allow for overdraft arrangement deficit months.
spend authorisation
•Assign staff to the purchase order team.
•Identify staff who can authorise/sign-off POs.
•Set financial maximum levels of authorization.
