A budget is generally a list of all planned expenses and revenues. It is a plan for saving and spending. A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods. In other terms, a budget is an organisational plan stated in financial terms. The purpose of budgeting is to provide a forecast of revenues and expenditures i.e. construct a model of how our business might perform financially speaking if certain strategies, events and plans are carried out. Also it enables the actual financial operation of the business to be measured against the forecast.
The management of costs is a very important ...view middle of the document...
Tesco model must be however subject to small and big changes. It means the manager of Tesco, should subject the business model to changes according to your competitor’s actions and markets status. By the term change, it also means that manager should be upgrading and improving all possible business operations. Manager needs to come up with new process and procedures to reduce costs.
Reviewing things like Tesco’s bank accounts, mortgage, pension and savings will also help to control the costs in many ways. It will also alert Tesco early to potential financial problems. Finance fixed assets requirements using loans, instead of overdrafts. Tesco should reduce unnecessary overdraft and loan facilities. Also they should cut back on working capital through just-in-time purchasing, better credit control and agreeing longer payment terms with Tesco ‘s suppliers. Tesco should apply for grants and subsidized loans. It is a good idea to look regularly at Tesco savings, borrowings and investments to make sure Tesco’s is getting the best deals available. Such as how much it costs Tesco to borrow money on its mortgage, loans, overdrafts, and credit. How well Tesco savings and investments are doing. The cost of insurance to protect Tesco’s income, its property and investments.
If Tesco does not review their bank account it will have disadvantages such as they will not know where their money is going. For example if the bank is taking high interest rate from their bank account they will not come to know until Tesco review its bank statement.
Competition allows Tesco to use its competitors as a way to control its operational costs. Tesco, can therefore research about their competitors on their suppliers and products details. The bidding process allows each vendor to submit a maximum willingness to pay for the Tesco ‘s products without knowledge of the other vendor’s offers. Finally, the best price will be going too selected by Tesco. This will save Tesco cost as they will be making sure in where they should improve and doing this research and comparing things with their competitors will specify exactly where they should improve on, instead of looking everywhere they will be more focused, which will be less time consuming. Although it will cost for researching, but once they have done their research they will make more profit, which will balance up their research cost accounts department.
Cost need to be controlled by Tesco in order to run their business activities smoothly and effectively. If Tesco controls their costs effectively they will save their money, which can be used for business expansion or can be invested...