1.3 Budgeting in Business

• The meaning of a budget
• The importance of budgeting in business
• Types of business budget
• Preparing a simple business budget
• Using a budget to control spending

• explain the importance of budgeting in business
• analyse the types of business budgets for financial planning
• prepare a budget to control spending in business
• appreciate the need for budgeting in business

“What is the importance of budgeting in business?”

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1. The importance of budgeting, and types of budget
   40 min · 1 practice tasks · quiz
   What a budget is, why every business needs one, and the main types of budget a business uses to plan.
2. Preparing a budget and using it to control spending
   40 min · 1 practice tasks · quiz
   How to prepare a simple business budget step by step, and how comparing the budget with actual results controls spending.
3. The meaning of a budget
   40 min · 1 practice tasks · quiz
   A budget is a money plan for a future period; it is not the cash book and not the accounts.
4. Why Kenyan MSMEs need a budget
   40 min · 1 practice tasks · quiz
   Budgeting plans cash, warns of a shortfall, controls costs, helps a SACCO say yes, and builds honesty at the till.
5. Sales and production budgets
   40 min · 1 practice tasks · quiz
   The sales budget comes first, in quantity and value; a production budget then plans how much to make.
6. Purchases and expenditure budgets
   40 min · 1 practice tasks · quiz
   Purchases plan the stock or materials to buy; expenditure plans the running costs of staying open.
7. The cash budget: when money arrives
   40 min · 1 practice tasks · quiz
   A cash budget maps money in and out by week so rent day does not land on an empty till.
8. Capital budgets and the master budget
   40 min · 1 practice tasks · quiz
   Capital budgets plan large lasting items; the master budget combines every budget into one overall plan.
9. Preparing a simple kiosk budget
   40 min · 1 practice tasks · quiz
   Four steps: choose the period, list income, list every expense, subtract. Worked example in KSh for Njeri's stall.
10. Surplus, deficit, and what to do
    40 min · 1 practice tasks · quiz
    A surplus is income above expenses; a deficit is a warning to cut, raise sales, delay a buy, or find a float before the month starts.
11. Budget variances: favourable and adverse
    40 min · 1 practice tasks · quiz
    A variance is budget minus actual; favourable is better than plan, adverse is worse - then ask why.
12. Using a budget to control spending
    40 min · 1 practice tasks · quiz
    The control cycle: prepare, record, compare, investigate, act. Honest M-Pesa and till records turn a budget from a wish into a tool.