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Illustrate the use of budget control in my chosen organisation which is Tesco.

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Introduction

P6 and M4: Illustrate the use of budgets as a means of exercising financial control of a selected company. Tesco: In this task I have been asked to illustrate the use of budgets controlled my chosen organisation which is Tesco. Tesco is one of the biggest retailers which are internally budgeting for sales growth by 2% in the UK, compared to its usual guidance of 3-4%. This is due to recession. The decision was made after the meeting between Tesco?s senior management and city analysis?s, shore capitals Clive Black said ?such budgeting is a significant change and indicates the seriousness of the economic slowdown and its likely duration?. The financial downside over the past month has seen various retailers cut back on expectations as consumer confidence takes a fresh drive. ?It would be no surprise to us if the recent financial turmoil has materially impacted consumer sentiment and sales for a short period at least, ?explained Mr Black. Recently towards the end of September, Tesco chief executive Sir Terry Leahy was saying it was ?perfectly possible? to deliver UK sales growth in its 3-4% range. ...read more.

Middle

Tesco has 440,000 staff worldwide, with 280,000 in the UK; also more than 2,100 stores in the UK and over 3,700 in totals worldwide. M4: Analyse the reasons why costs need to be controlled to budget. All businesses need to know their budget available to run the business and the costs they have to run that business. The costs in a business cannot exceed the budget otherwise the business will have a negative balance, and the business won?t be making no money at all. The costs need to be controlled to budget because if they are not controlled to the budget the banks will not lend any sort of loan to the business. The businesses would think that this business is not making any progress. It is going down day by day. The banks would think before giving loan to the business whether or not the business will be able to return the loan within certain time period, the time which is given to them. ...read more.

Conclusion

If all these things are done after the deadline, they can lead problems and the trade balance can go down. The business never knows about the unforeseen circumstances. The business needs to have some money in the business in case if the business needs it in the form of emergency. For example if the delivery van breaks down in a business the business would need money to repair as this would not be planned and it is an unforeseen circumstance. The business should invest the money they have instead of keeping it as you never know when an incident takes place for example an incident like bank robbery. This can make the owner all the money he or she had saved up so far and the owner won?t be left with nothing. Another such hazard can take place like flooding which would eventually take away all the money of the owner. The business will end up spending more than the budget which would lead the business in complete loss and will end up the business owner borrowing a lot of money and then not being able to return that money one day which would put down the business. ...read more.

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