Budgeting and Managing Money

Understand the importance of budgeting in a business context.

Reasons for budgeting may include:

• avoid getting into debt 
• controlling costs
• remaining solvent
• future planning

Assessment Criteria

• 1.1
  Describe the advantages of planning a budget in a business context.
  

Understand key financial concepts.

Learners need demonstrate an understanding of the terms price, cost and profit.

Ways to improve profit may include:

• increase price on some products 
• no discounting
• reduce overheads
• review prices
• take cash discounts from suppliers
• know your stock 

Assessment Criteria

• 2.1
  Explain the difference between price and cost and the concept of profit.
  
• 2.2
  Describe how to improve profit, for example through cutting costs, improving revenue, increasing prices.
  

Know about income and expenditure.

Examples of business expenditure may include:

• operating costs eg facilities management including cleaning, heating, lighting, business insurance
• staffing eg pensions, national insurance, recruitment costs
• income tax and VAT

Examples of income may include:

• sale of products or services
• government funding
• loans

Ways of estimating income may include:

• forecast sales over a specified period of time
• estimate additional income
• calculate known expenditure including tax

Assessment Criteria

• 3.1
  Describe different kinds of business expenditure, for example fixed and variable costs.
  
• 3.2
  Describe different kinds of business income.
  
• 3.3
  Explain how businesses estimate income, for example forecasting sales volumes and selling prices.
  

Understand how businesses manage key financial information.

The purpose of key financial documents may include:

• use information for future financial planning
• monitor income and expenditure
• identify areas to reduce costs
• monitor irregularities
• auditing purposes
• record of financial transactions

Ways to check for errors may include:

• double check entry data
• balance sheets
• identify errors of omission or commission
• independent advisor
• double entries

Assessment Criteria

• 4.1
  Explain the purpose of key financial business documents for example business plan, spreadsheets of income and outgoings, bank statements, payslips, receipts, invoices.
  
• 4.2
  Explain how financial information can be checked for errors.