Manage Budget and Financial Plans
Planning a Budget
Davis Service Group is a large public limited company employing around 17,000 people. Its shares are quoted on the London Stock Exchange.The business is based on service contracts to source, clean and maintain industrial textiles, such as protective clothing and linens. This is across four key sectors: workwear, healthcare, hotels and restaurants, and general facilities, such as washroom linen
Budgets are forward financial plans. They show financial targets over a given period of time for income, expenditure and cash flows within a business. Davis uses budgets to plan the future use of its resources, either in the short or long term. For example, operational areas need to assess the costs of the people needed to meet production targets or the marketing team must determine costs of promoting services to increase sales. Budgets are also communication tools which allow employees to understand where the business is heading.
Section 2 -
Advantages and disadvantages -
There are many advantages to using budgets. They: provide a method of allocating and using resources within the organisation help to monitor and control operations promote forward thinking show employees an overall picture of the direction of the organisation which can motivate staff help to co-ordinate different departments and align them towards shared objectives provide a framework for delegation.
Sensitivity Analysis –
Managers use sensitivity analysis to review different scenarios. They ask questions and consider the impacts of various alternatives (the “what-ifs”). For example:
The economic outlook - What is the overall economic trend for the UK and Europe? For example, increased redundancies during a recession would mean less demand for workwear. A sharp rise in the value of the euro against the British pound would make earnings from Davis” European business more valuable to the company.
Customers - How are customer needs likely to change? For example, some
Davis Service Group is a large public limited company employing around 17,000 people. Its shares are quoted on the London Stock Exchange.The business is based on service contracts to source, clean and maintain industrial textiles, such as protective clothing and linens. This is across four key sectors: workwear, healthcare, hotels and restaurants, and general facilities, such as washroom linen
Budgets are forward financial plans. They show financial targets over a given period of time for income, expenditure and cash flows within a business. Davis uses budgets to plan the future use of its resources, either in the short or long term. For example, operational areas need to assess the costs of the people needed to meet production targets or the marketing team must determine costs of promoting services to increase sales. Budgets are also communication tools which allow employees to understand where the business is heading.
Section 2 -
Advantages and disadvantages -
There are many advantages to using budgets. They: provide a method of allocating and using resources within the organisation help to monitor and control operations promote forward thinking show employees an overall picture of the direction of the organisation which can motivate staff help to co-ordinate different departments and align them towards shared objectives provide a framework for delegation.
Sensitivity Analysis –
Managers use sensitivity analysis to review different scenarios. They ask questions and consider the impacts of various alternatives (the “what-ifs”). For example:
The economic outlook - What is the overall economic trend for the UK and Europe? For example, increased redundancies during a recession would mean less demand for workwear. A sharp rise in the value of the euro against the British pound would make earnings from Davis” European business more valuable to the company.
Customers - How are customer needs likely to change? For example, some