Budgets and forecasts

LO
To know why business must look
ahead to survive

RC
Predicting the future

How can we predict what

 sales or consumer demand will be

 Wage increases will be

 Transport costs will be

Forecasting methods, just like
forecasting (predicting) the
weather.
Sales Year
 What are the
predicted sales for
$150000 2006
2009 based on the
trend from the
past? $175000 2007

$200000 2008
 Forecasting methods

 Forecasts= predictions for the future

 Trend= the general movement of the

data over time
Example-up, down or static

 Line of best fit=using a scatter graph to

show the general trend
 Forecast
Line of
best fit
Sales ($)

Years
 Budgets are plans for the
future

The advantages
 Give managers and workers targets to
work to
 Variance analysis = The difference
between the budget and the actual figure.
This will tell us how well the business is
performing compared to how we expect it
should be performing.
 ADVERSE / FAVOURABLE
Budgets are plans for the
future

The advantages
Budgets help control how money is
spent so no department overspends
Budgets are plans for the
future

Budgets are particularly important in

making sure the business has enough
cash to pay its month to month
debts
Over to you

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 Complete activity 6.6 Case study