Writing Frame – Managing Resources Assignment 2.
- A) Why is budgeting important to ensure effective use of resources
- B) Describe what the potential consequences of mismanaging budgets could be, you might chose to add some examples of organisations that have suffered from poor financial planning and management.
- Describe and evaluate several budgeting techniques and identify which would be suitable for the business in the case study and explain why you have chosen this method.
- Produce a 12 month cash flow forecast for the business in the case study.
- Having produced the cash flow, now explain what the total costs are for the following resource groups: Human Resources, Physical Resources and Financial resources.
Case study :
Jules and Oscar Interior Designers
Experienced interior designers Jules and Oscar decide to go into business together. They
enter into a partnership, with each of them investing £25,000 into the business. Their
“product” is a home-makeover service, modelled on the popular daytime television
programmes where ordinary households are transformed through small building work and
decoration. They also rent a small office where they employ a receptionist/administrator on
a part time basis, two days a week.
Revenues:
Jules and Oscar expect to gain 2 projects per month for the first 6 months of trading; each
project will generate £10,000 of sales and will be paid up front, in the month of the work
starting. In third quarter, they are expecting that sales will increase to 3 projects per month.
The final quarter, they assume that business will slow down as customers prepare for
Christmas – they anticipate 1 project per month for the final 3 months of the year. Each
project is expected to last one month.
The main costs of the business are:
Equipment – £2,500 (month 1) & £2,500 in month 4)
Marketing – £250 per month
Legal and accounting costs – £1,250 (month 1)
Project materials – £1,500 per project (i.e. £3,000 per month).
Sub-contracted labour (other tradesmen) – £4,000 per month. These will be paid in
the month incurred.
Emily (receptionist/administrator) – £500 per month
Jules & Oscar will pay themselves a salary of £1,000 each per month whilst the
business is established.
Rent – £200 per month
Phone and internet – £100 per month
Electricity – £100 per month
Water – £50 per month
Business rates – £100 per month
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