Notesale: Turn your study into money

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Unit 2: Business Resources
Report 1 – M4/D3

Costs Controlled to Budget
Next PLC set budgets for many reasons
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This could mean employing more staff, investing in buildings or facilities etc
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This then could
have a domino effect and negatively affect the whole company, which again would decrease
profitability
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They must
make sure not to overspend their budget, as this will affect their profitability as well as their
budget plans for the next financial year and possible more to come
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This means that they must use more money to invest in projects and
ideas that are likely to bring them more profit, over ventures that won’t benefit them much
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This could affect their business as it could reduce their
profitability meaning less of a budget for the next year
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This is useful
to them as they can look back on their investments and see what cost them the most and what
gained them the most benefit and profit
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One
problem that could occur would be that their investments could be outdated and whilst that
investment once made them a lot of money, reinvesting in a similar project may not have the
same effect years down the track
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If Next overspend past their set budget, they are
losing out on their profits and this could then put them in debt and if they don’t have enough
assets to cover their debt, this could end up in bankruptcy
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To avoid this,
Next must budget around the money they already possess and know they are going to earn
throughout the financial year
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Lastly, it is important that Next set budgets so that they know what finances they need in the
future
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This means that they can also plan an idea of future budgets and can set targets
to make sure they receive the funds to cover these investments and future budgets
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