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Keeping Control of Budgets.

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Introduction

Accounts are essential for ensuring that directors and managers are accountable to the shareholders and that they act honestly and efficiently in the interests of shareholders. Financial accounts are also produced for the benefit of creditors, prospective creditors and prospective investors. In addition by tax authorities require the accounts of business to assess tax liability. Customers, suppliers, the community at large and employee may also be interested in company accounts. Keeping Control Keeping control of money is part of life. Is there enough money in the bank to pay the electricity bill? Can we afford that expensive holiday? Efficient people keep records that allow them to answer these questions quickly and easily. The same principles apply to business. Keeping records provides information that: * gives early warning of the problems the business might be facing. The business can then take action to avoid these problems; * saves time (and therefore money) when information is needed; * makes it easier for the business to stay within the law, as all business have to keep accounts for tax purposes. Budgets A budget is a short-term plan of action outlining what the business wants to achieve, what it needs to do to reach its goal and how much it will cost. ...read more.

Middle

Budget Period A Budget is drawn up in a period of time before it is to be put into practice. Most business use the financial year as budgetary period, then annual budget is then broken down into quarterly or monthly budget depending on the need of the business. Purposes of the monitoring and management of cash flow and cash budget The management uses the business budget and cash flow forecasts for variety of reasons, for example to plan for: * an expansion of the business; * the costs of unexpected events; * reductions in the costs of the business; * monitoring and reviewing performance in the light of variances experience. * Planning for an expansion of the business As we saw before, business can obtain funds from various sources such as their retained profit and also borrowing. Looking at the business financial and management accounts will give the management some ideas about the level of gross, net and also retained profit. The business net profit is usually distributed to three main directions: 1. tax; 2. dividends to shareholders; 3. retained profit. Net Profit - tax = profit after tax The management has to make the decisions about the distribution of their profit after tax e.g. ...read more.

Conclusion

IT related projects are notorious for running over budget. There is no reason why this has to be the case if you take time to cost the project properly at the outset. It is not uncommon to see project budgets that cover only part of the costs. There are many reasons for this such as: * A tendency to focus on initial purchase costs and ignores elements such as staffing. * Poor planning that doesn't allow sufficient resources for training and staff development. * Blind faith in 'optimistic' supplier estimates. Project managers don't think their senior managers could cope with knowing the true cost. The last point should not be under estimated. In many organisations the fact that IT projects always run over budget is accepted as the norm. Managers find it far easier to keep asking for small incremental sums than to give their sponsor the shock of saying 'this is what the whole project will actually cost'. Project costs are relatively easy to 'hide' in large IT departments where existing staff are carrying out the work. The types of costs incurred in a project will be split between capital or one-off costs and operational costs. The information below shows some of the major cost headings and suggests issues to think about when trying to cost those items. ?? ?? ?? ?? 1 ...read more.

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