Budget for the Short Term

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I personally love having budget’s, so when I read the beginning of this chapter I was excited for what was to come. I have a wedding coming up within the next 2 years so I am on a budget so I can save for this and have it payed off before the big day! I created a budget that included all of our expenses and income, so I could work out how much money we would need to save each week to reach our goal of $25,000. I then took a step back and really looked to see if it was a realistic goal. This is where I thought of birthdays throughout the years, Christmas etc. I also looked at whether we could cut back on any expenses, maybe not as many takeaways, or somehow lower our electricity bill? A budget can be very difficult to stick to, trust me I would know, but it is a great tool for personal use and for firms. It helps to achieve your personal goals, in my case, my wedding, and for firms it helps them achieve their goals as well.

For example, whenever I do a roster at work for my team I always have budgeted hours that I stick to. I don’t go over them, if anything I under schedule people so that there is a back up of hours. If I was to schedule hours over the budgeted hours then this would eat into my gross profit. Unless I worked out that the return on investment would be worth it. Would it be worth it to schedule more than my budgeted hours over Christmas? Will my return on investment be profitable? These are all things that I think of whenever I do a roster for my store. Other variables also play a factor into this, I look into penalty rates for my team and I put the strongest sales representatives on weekends, rather than week days. This provides a strong return on investment for me as whom I have scheduled on weekends/public holidays are really earning their wages and it turns out to be profitable for me and my store. My company has an incentive at the end of each month, whether a store has achieved their sales budget and gone 6% above their gross profit budget, then money is payed out to everyone at the store. So as a manager, I have to really stick to budgets and KPI’s (Key performance indicators), which is where my planning comes into play.

I am not involved in a participative budgeting for my store. Budget’s are created within the head office and then are given to me. I then have to work out ways as to how my store will stay within the budget. I would love to be a part of participative budgeting, as I really love setting goals and working out how you can achieve them. A downside of me not being involved in participative budgeting, is that the head office don’t work in stores 24/7 like I do, and I know when it’s busy or when it’s not. I know that it’s busier on a weekend then it is on a weekday at my store, but this is not the same for every store. I am not involved with master budgets either, but we do get told how much our salaries cost us weekly, and at the end of each month I am sent a report that shows the salary costs, sales budgets and actual and per labour hours worked. I can see how useful master budgets are to managers as it incorporates all different budgets into one. It includes direct labour, materials, finished goods, manufacturing overhead, production, sales and administrative budgets.   

The next section that stood out to me was the part about sales and production budgets. I completely agree with what Martin wrote about how a production manager, in my case, my buyer and inventory control, forecast what production levels are achievable for each of the products that we sell. I am in contact every day with inventory and buyers requesting more of a certain product that sells really well at my store. Again, every store is different, my customers love cheap and coastal products, so that’s where myself, as a sales manager steps in and ensures that we have enough of these products to keep my customers happy. So the buyers and inventory then look into the production lines of all of the stores, and they pull the products I need from another stores inventory and send it to me. Vice versa, I do not sell a lot of high priced products at my store, so they have ceased producing products like these for my store, and I have sent these products to another store that sells them really well.

As I have stated above, I never receive an income statement or balance sheet for my store. I am sent a different report, so I use this to analyse what I am doing within my store and how I can effect a positive change. I think me being a manager has given me a better insight into how budgeting effects a firm and an individual. I am feeling more confident after reading through this chapter and am excited to get back to my budgeting for my personal goals now!