M4 Costs & Budgets

1. M4 Costs & Budgets Analyse the reasons why costs need to be controlled to budget

2. M4 Budgets From the budget, identify three problems that Debenhams are facing

3. M4 Budgets Three problems Made a loss in February & March Wages are very high, compared to receipts Two months credit is too long & would damage the cash-flow

4. M4 Budgets What would you advise Debenhams to do in order to improve their budget position? (Give two points with explanations)

5. M4 Budgets Two points Encourage some workers to work part-time. This reduces the wage bill, keeps skilled & experienced workers & allows flexibility Introduce interest on the outstanding balance to debtors after the 30 day interest free period

6. M4 Costs What are the advantages of controlling costs?

7. M4 Costs Advantages of controlling costs Lower Prices – more competitive against rivals Increase in market share - greater customer loyalty & may attract new customers from rivals Growth/expansion – able to diversify product range & increase the number of stores

8. M4 Costs What are the disadvantages of not controlling costs?

9. M4 Costs Disadvantages of not controlling costs Higher prices – costs rise due to poor management & passed onto customers Less competitive – rivals will be more price competitive Loss of customer loyalty – poor reputation, image & word-of-mouth will lead to customer dissatisfaction

10. M4 Costs What are the potential problems of not controlling costs on budgets?

11. M4 Costs Potential Problems for Debenhams Smaller budgets in the future – aggressive cost cutting company side means budgets will be cut to reduce costs With smaller budgets, it will be harder for staff to meet targets, gain their bonuses This will create a de-motivated workforce