then we can determine our quantity requirements in order to meet those sales. Possibly, on that basis we can negotiate better buying prices.

If we are buying multiple components to manu

BUDGET SETTING

This is the single most neglected feature in any organisation.

Yet without setting budgets we have no goal posts through which to kick the ball!

As in sport, we should always strive to stretch our limits. Thus Sales Budgets provide the impetus that drives the whole venture.

We all need some yard stick by which to determine what pricing to put on to a product or service that we sell.

It is often easy to determine the price that we pay for an item that we purchase – just look at the invoice!

However, not even this is always so easy. Do we buy it from Supplier “A” or Supplier “B”. Which gives the best price, then do either offer better pricing for bulk buys? Again, once we have set a realistic Sales Budget, then we can determine our quantity requirements in order to meet those sales. Possibly, on that basis we can negotiate better buying prices.

If we are buying multiple components to manuf

port, we should always strive to stretch our limits. Thus Sales Budgets provide the impetus that drives the whole venture.

We all need some yard stick by which to determine what pricing to put on to a product or service that we sell.

It is often easy to determine the price that we pay for an item that we purchase – just look at the invoice!

However, not even this is always so easy. Do we buy it from Supplier “A” or Supplier “B”. Which gives the best price, then do either offer better pricing for bulk buys? Again, once we have set a realistic Sales Budget, then we can determine our quantity requirements in order to meet those sales. Possibly, on that basis we can negotiate better buying prices.

If we are buying multiple components to manu

o put on to a product or service that we sell.

It is often easy to determine the price that we pay for an item that we purchase – just look at the invoice!

However, not even this is always so easy. Do we buy it from Supplier “A” or Supplier “B”. Which gives the best price, then do either offer better pricing for bulk buys? Again, once we have set a realistic Sales Budget, then we can determine our quantity requirements in order to meet those sales. Possibly, on that basis we can negotiate better buying prices.

If we are buying multiple components to manu

always so easy. Do we buy it from Supplier “A” or Supplier “B”. Which gives the best price, then do either offer better pricing for bulk buys? Again, once we have set a realistic Sales Budget, then we can determine our quantity requirements in order to meet those sales. Possibly, on that basis we can negotiate better buying prices.

If we are buying multiple components to manu

then we can determine our quantity requirements in order to meet those sales. Possibly, on that basis we can negotiate better buying prices.

If we are buying multiple components to manufacture something then the number of questions begin to increase.

The next questions that then arise are quality of components, and suitability of combining one with another. What about wastage – can we afford to either scrap or re-work components?

What effect does re-work have on labour costs?

In a previous Practical Accounting Article we touched on Costing Theory. This also discussed the need to allocate indirect costs against the provision of a manufacturing process, or the provision of a service.

Probably, by now you begin to see the need for budgets as they can be used to assist in the costing exercise.

Where the volume of sales is somewhat consistent between one year and another then the historical figures can be adjusted to a