Posts Tagged budget concerns
Word About Costs When Creating a Budget Plan – part 1
Posted by admin in Companies, effective budgeting, fixed costs, management skills, market forecasts, short-term income on August 1st, 2009
When budgeting for labor costs, the distinction to keep in mind is between direct and indirect. Direct labor costs are those incurred in any work on products or services that can be tracked readily, such as wages for assembly line workers. Indirect labor costs are for activities related to products or services that are not readily tracked, such as salaries for supervisors and support personnel. Both direct and indirect labor costs can be either fixed or variable.
Let’s look at the three types of costs that make up the expenses part of a budget.
Fixed costs are perhaps the most important costs to manage. They are the costs that remain constant throughout and are impervious to the cycle of business. The rent you pay from month to month is a fixed cost because it doesn’t vary no matter what your sales pattern might be. To a large degree, salaries also are fixed costs, although they may have variable components in terms of performance bonuses. Utility costs are the same way. Any expense that remains constant no matter what the cycle of business is a fixed cost.
Budget Components – part 3
Posted by admin in budget, effective budgeting, equity, manufacturing, short-term income on July 31st, 2009
A capital budget sets aside funds for capital expenditures. These are primarily new pieces of equipment or facilities, to be used over a period of years. Strategic in nature, a capital budget involves looking at the long-term profit that’s likely to come from investing in that equipment or building.
Many companies allow for flexible budgeting, a process by which budgets are adjusted to match output and/or marketplace factors that influence the company’s revenues and expenses. Companies with a sudden short-term, unbudgeted income opportunity may create a flexible budget that adds to the expense side of the equation, but also adds corresponding revenues from product sales.
Other roles of the budget
Posted by admin in effective budgeting, financial growth, market forecasts, revenue on July 31st, 2009
A budget has many uses beyond charting the company’s financial goals.
It can assist in measuring the feasibility of technology development— both its likelihood and its application—and can help provide marketplace forecasts. It also may help measure the impact of new legislation affecting the market and may reflect new regulations—both internal and external—that touch the company. It’s all there if you know where to look.
If your company makes ball bearings, the tactics for creating better bearings may be to define consistent settings on the milling equipment and monitor those settings as a way to reduce inconsistencies, thus reduce costs due to production problems. The procedure for doing so might involve a worker performing an inspection every half hour, noting the settings in a log, and reporting to the supervisor any variations beyond allowable limits. Or if your concern is with sales, the tactics may be to identify territory penetration for a sales force right down to the number of new contacts made per week with revenue computed on the number of sales per call made each week. The procedure would likely involve logging all new contacts and tracking the results. These are budget concerns and can be measured by the financial impact on your company of both revenues and costs generated.