Evaluate the problems you have identified from unmonitored costs and budgets
In this work assignment I have been told to evaluate the problems that occur if the costs and budgets are unmonitored.
A simple problem that occurs if we are not monitoring the budget and costs then we will not know how the company is performing. A budget is a set goal and it is something to follow for the company. It is like we plan our day, sometimes we have to make adjustments but overall we have a plan on what we want to accomplish and if we don’t keep up or pay attention on what we are doing its more than likely we will not complete all of our tasks for the day. It is also to make sure that we aren’t going overboard on the costs, if we set percentages and if we are going way over or way under the percents then we predicted then we are going to have to find out what is causing it to be so extreme.
Another problem can be if we leave our budgets unmonitored, they can go completely out of control. We can overspend, and we could over withdraw from it. We could lose money, and go into debt because we didn’t monitor our spending. Also, our budgets could change because of changes in our environment, such as a new child in the house or somebody losing a job.
The profit in a business is equal to profit= revenue – costs. In this case if the costs increase over the revenue than the profit will fall and if the costs fall than the profit will rise. The financial statements used to represent budgets and cash are cash flow, profit and loss account and balance sheet. Every plc limited business has to have a balance sheet and a profit and loss account. These help them estimate their cost and budget. Cash flow helps the businesses to calculate the profit and loss. The gross profit = sales revenue-cost of sales. If the cost is not calculated in a business then the gross profit cannot be calculated. The net profit= gross profit-expenses. If the business does not calculate the costs and the budgets then more likely to be said they cannot calculate any of these. If these are not calculated the business cannot find out how much progress it is making in the international market and even in the local market. The business cannot compare their costs and profits compare to other businesses and they cannot even find out if they are doing better than them. If the business does not monitor its costs and budgets they might have to face loss due to that.
If the costs and budgets are not monitored in a business and unforeseen circumstance take place then the business cannot take any action. They might already be facing some sort of loss which they might figure out at the time when they require money. The business might not have no money to overcome this unforeseen circumstance so that’s why the costs and budgets need to monitored.