What are cost centers? Give examples of cost centers that might be encountered in an organization.

Cost centers are the sections, departments, areas, etc that are accountable for their own expenditure and to which costs can be allocated. There are two types of cost centers one is production cost centers where the products are manufactured or processed and the other one is service cost centers where a service is provided to another cost center. These areas include marketing, admin, manufacturing, sales, and production. If you want to learn more about busienss administration or some of the functions the business admin does, considering enroling in a business administration course. Study and enrol today

What is the importance of a cash flow budget or report?

A cash-flow budget forecasts what cash your business will have to meet expenses and helps you ensure your business meets its day-to-day commitments. It compares all outgoing funds with the incoming to determine whether the business is in front or struggling to keep up. It’s important to understand the cash flow and to understand the items that need to be listed in each category. It’s also important to understand when these transactions are taking place. There is the chance that a customer has bought an item but takes a long time in paying it off. Although you might have made a profit on the sale of the item, there is a cash flow gap as you have not yet received the funds to pay for the item yourself. Simple things like can put smaller businesses in a lot of financial trouble. This cash flow gap could damage credit ratings, miss other opportunities, and force the borrowing of funds.  Also, check out this resource that is provided by the Australian government. How to prepare a cash flow budget for business owners

What data do you need to collect, and from whom, in order to construct a cash flow budget?

Sales reports – last periods figures Outgoings such as purchases, marketing, loan repayments, etc Staff costs Capital such as stock on hand and cash.

Describe how the budget is used to monitor work, performance, variation, and team/ division outputs.

The budget reports are designed to give a clear overview of how the business is running. Every expense can be calculated as a percentage of the total expense/margin to see if it is cost-effective. If it is being overspent, then something needs to be done. This could be several things such as reducing spending, reducing or increasing staff levels, cross-training staff, incorporate techniques to increase sales, reduce stock levels, outsourcing, and renegotiating supplier costs.

 

What is the meaning of the following terms:

  • Usually referred to as property or products that are of value and cash. Loosely referred to as employees of the company on occasions.
  • Something that is a responsibility or what the business owes. It can be an object, debt, financial obligation, time, employee, etc.
  • Something that needs to be paid or something that will cost a sum of money. Expenses can also be fixed, such as mortgage, insurances and can also be variables such as purchases and outgoings, bills, etc. d. Equity. The portion of a business or property that is owned beyond the debt. It can be known as stock.
Categories: business

Leave a Reply

Your email address will not be published. Required fields are marked *