ABSTRACT
The syllabus for section 3.4, Financial information to support marketing decisions, states that students will need to demonstrate their understanding of basic financial concepts through their application to marketing management decisions in a variety of contexts, Specific areas of application will include: 3.4.9. Budget preparation and control, in relation to marketing decisions, e,g* budgeted profit and toss statements for a specific product range. 34,10, Application of financial information required to improve customer service or enhance product quality. 3.4.11. Identification of appropriate variances and ability to draw implications from them, e.g. between budgeted and actual figures, Budgeting is one of the most common planning and control techniques employed by organizations. As a result most marketing personnel will have been involved in the preparation of budgets and subject to the control aspects of comparing the budgets against actual figures. Several types of budget are prepared but they all stem from the determination of the goals and objectives of the organization by the senior management. A strategic plan is developed from the aims, goals and objectives of the organization, which sets in train the preparation of short-Zmedium-term plans, From the short-term
plans, budgets are set, £vertueiiy actual figures am compared with these budgets and variances am calculated, then Investigated. The investigation of the variances leads to corrective action being taken, either by changing the budgets, or changing the actual figures in the future. Another planning and control technique is standard costing. This technique will be less familiar to marketing personnel as it is used in a limited number of organizations, which produce a significant number of simitar products, Le. where mass production is employed. It is a highly sophisticated planning and control device as it is focused on each component of a product Many of the variances am calculated from the costs of the product, However, some are calculated from the sales or safes margin of a product. For organizations which yse standard costing, a significant amount of time is spent preparing the standards and variances in the management accounting function. The same is true of companies which use budgeting. However, knowledge of budgets, standards and variances should not be confined to the management accounting function. Marketing managers should have art overall view (helicopter) of budgeting and standard costing as both these techniques feature in t ie planning, control and decision-making of an organization, Again marketing managers should understand the assumptions made in the use of the techniques of budgeting and standard costing and be aware of the implications of those assumptions in planning, control and decision-making, Although the marketing manager might not calculate the information, they will certainly be involved in the preparation of it and the use of it, A prerequisite for this unit is that of Marketing in Practice (Certificate level), part of which is focused on the administration of the marketing budget This unit is focused on the whole of the budgetary planning and control process, including the marketing budget
Definition Budgeting - the financial evaluation of a plan of action prepaid in advance of the period to which if relates,
The budget is usually prepared several months before the start of the financial year. The budget for a January financial year will probably commence in October of the previous year. Budgets are usually prepared on an annual basis, although some companies prepare budgets for three years, the first year in detail (by month) and summary budget for the next two years.
