AC4.1 Explain the uses of a budget
Businesses use budgets to plan, monitor and control the spending within the business in order to manage their financial resources more efficiently. Budgets also give businesses guidelines to follow, this gives them direction and co-ordination, in order to help the company move forward as opposed to not having a goal or objective to move towards. Capital budgets are used for any investments in resources needed, to last more than a year; these are also typically used to generate profit/income. Operational budgets cover the day-to-day spending within a business which includes wages, utilities and supplies etc. Money can be borrowed from the operational budget for capital expenditures. At Tinsmiths our budget is managed by the Business Owner/Manager and the Finance administrator, they work together to ensure effective financial management, and to make sure that the budget is realistic and appropriate for each department/section. It is the role of the shop manager and office manager to decide if they need extra resources/supplies for their department throughout the year. It is also good practice to factor into the finical forecast a budget for innovation and investments and any other potential future activities that may occur throughout the year as this will leave you better …show more content…
The amount of money that is spent during marketing will affect the overall profit of sales. Although spending money on marketing is sometimes necessary, it could be more effective to discuss ideas with other departments within business to see if there are less expensive methods e.g. the sales team, as information regarding market segmentation for example may already be readily available, meaning that the money that would’ve been used for that does not need to be spent. A budget is just an estimation of how much is going to be spent; therefore appropriate margins should be accounted for in order to make a substantial