Chapter 3: Identifying budget data Flashcards
Types of data
Data
Information
Data - Simply raw facts, numbers or transactions in the accounting system
Data example - thousands of individual sales invoices that a large company may be sent to customers in the year
Information - data which has been processed in such a way that is meaningful to the person looking at it
Information example - a set of management accounts clearly showing the break-down of monthly sales by product line
Quantitative Data
data that is measured with numbers
numerical form
such as how long it takes to produce one unit of production
Qualitative data
Cannot be measured in numerical or monetary terms
such as level of quality of our product
Primary Data
Data gathered by yourself for a specific purpose
Can be tailored to your individual requirements and the source of the data will be known
Can be expensive and time consuming
Secondary Data
Data gathered by someone else
Secondary data can be out of date, incomplete or not specific to your particular needs
Can be less expensive and quicker to obtain than primary data
Sources of data
Internal and external
Internal - data collected from within the organisation
Example of internal - inventory records
External - outside the organisation
example - government statistics
Forecasting v budgeting
Budgeting - is a plan, where do we want to be?
Forecasting - prediction of what is likely to happen, forecasting is not a goal
Forecasting sales
4 methods
Sales experts - using knowledge provided by experienced sales managers within the business who will have a good idea of what sales are going to be
Market research - try to identify what customers are likely to buy in the next period by asking them - questionnaires or interviews
Time Series Analysis - identifying patterns in the data
Linear regression - using historical results to predict the future
Forecasting expenditure
4 Methods
Production and purchasing managers - asking knowledgeable managers who are involved in the factory or deal with suppliers
Market research - Talk to suppliers directly to get their thoughts on what they will be charging next year. Alternatively we could pay a market research agency for copies of reports that they have already produced
Time Series Analysis and linear regression
Price indices - using predictions of the likely inflation of costs to help to budget expenditure