The preparation of budgets

The way in which a budget might be prepared is a step by step process. The first step is to decide upon a budget period and state the objectives which are to be achieved. The budget period may vary according to the type of budget, but one month or one year is usual. Often the objectives will be set at board level. Targets for performance, market share, quality (provided it can be quantified) and productivity are all examples.

The next stage involves obtaining information upon which the budget can be based. Some information can be obtained from previous results. Historic information can be useful, although some budgetary techniques ignore the past and make a fresh start. This is called zero-based budgeting. Forecasts are another source of information. These are estimates of likely future outcome. Some business variables are easier to forecast than others. It is fairly easy to predict future costs, but difficult to estimate future sales. This is because sales levels are subject to so many external factors.

It is now possible to prepare two important budgets – the sales budget and the production budget. These budgets are related and affect all other budgets. For example, sales targets can only be met if there is productive capacity. Also, a firm would be unlikely to continue production if it could not sell its products. The sales budget will contain monthly sales estimates, expressed in terms of quantities per product, perhaps, and the price charged. From the sales budget, and with knowledge of stock levels, the production budget can be determined. This will show the required raw materials, labor hours and machine hours. At this stage the business should know whether or not it has the capacity to meet the sales targets. If it not possible, then it may be necessary to adjust the sales budget.

Subsidiary operating budgets can be drawn up next. These will be detailed budgets prepared by various departments. Budgets are often broken down, so that each person in the hierarchy can be given some responsibility for a section of the budget.

The master budget is a summary statement. It shows the estimated income, anticipated expenditure and, thus, the budgeted profit for the period. The cash budget can also be prepared when all other budgets are complete. This budget is particularly useful since it shows the monthly flows of cash into and out of the business. It will help to show whether future cash flow problems might occur.

The final step is to prepare the projected balance sheet. This shows the financial position that will result from the firm’s budgets.

Задание 18. Переведите деловое письмо с русского языка на английский язык:

LETTER 6

Уважаемые господа!

Сообщаем Вам, что, к сожалению, Ваши условия нас не устраивают. Однако, если Вы согласитесь пересмотреть цены и дать нам 2% скидку, гарантировать немедленную доставку, продлить гарантийный срок, а также оплатить страховку, мы готовы рассмотреть Ваше предложение еще раз и разместить заказ в Вашей фирме. Мы готовы даже увеличить его на несколько единиц товара, что будет зависеть от окончательной цены.

Если мы разместим заказ у Вас, мы должны будем настаивать на немедленной поставке. Можете ли Вы гарантировать поставку в течение трех недель со дня получения заказа?

Мы ведем с Вами дела уже несколько лет и всегда были хорошими партнерами. Надеемся, что и на этот раз Вы сможете выполнить нашу просьбу и пойти на уступки.

С уважением, …

Задание 19. Прочитайте и переведите текст по специальности со словарем:

Compared to selling in the domestic market, selling abroad can create extra problems. Delivery generally takes longer and payment for goods correspondingly can take more time. So exporters need to take extra care in ensuring that prospective customers are reliable payers and that payment is received as quickly as possible.

In the first and in the last analysis, payment for exports depends on the conditions outlined in the commercial contract with a foreign buyer. As explained previously, there are internationally accepted terms designed to avoid confusion about cost and price.

The way exporters choose to be paid depends on a number of factors: the usual contract terms adopted in an overseas buyer’s country, what competitors may be offering, how quickly funds are needed, the life of the product, market and exchange regulations, the availability of foreign currency to the buyers, and, of course, whether the cost of any credit can be afforded by the buyer or the exporter.

There are four basic methods of payment providing varying degrees of security for the exporter:

1) payment in advance,

2) open account,

3) Bills of Exchange,

4) Documentary Letter of Credit.