Budgets Flashcards
What is the point of budgeting
acts as a flag when doing well or not doing well
Budgeting is done within set parameters why
always be limits the business sets , looks at variance analysis
If you get within 3% up or down of your budget what happens
we don’t discuss it. Its minor- minimum amounts Not worth looking into for the board.
What are items by exception
Exception reporting - where you’ve targeted something and its gone beyond acceptable parameters. Needs to be looked into
Who looks at exception reporting
Board level or management level where they are significant
How does budgeting work?
Board creates aims and objectives
Based on predictions they roll it budgets for income per month and expenses per month
What happens at the end of each month for budgets
Compare actual performance against plan and determine whether you need to do corrective action.
What are the methods of budgeting
Top down budgeting
Bottom up budgeting
Fixed
Flexible
What is top down budgeting
Traditional form of budgeting. - targets set by the board and passed down through the channels
What is bottom up budgeting
The staff set the individual team targets - then joined together to make company targets. Works well in mutual insurers/ no commission targets etc
What is fixed budgeting
means can’t be changed - like local authorities
What is flexible budgeting
can be changed
What is zero based budgeting
Research and development departments. Starts from scratch every year. Justify why you need things each year.
What is a rolling budget
Only tends to be used by smaller firms as admin intensive. Every month you change the budget.
What is the advantage of a rolling budget
Always have a budget thats up to date
