Question

Explain the role of the following types of data sources in the budget development process. Write your answer in 25 – 50 words for each. Competitor research Customer or supplier research Declared commitments in areas of operation Financial information from suppliers Financial proposals from key stakeholders.

Answer 1

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(a) Competitor research:-

Competitor researches are useful for establishing opportunities for your business and also threats that your business might face. Try to find out what products and services your competitors are offering, what their pricing strategy is and their future plans, whenever possible.

(b) Customer or supplier research:-

Important for any business to understand their customers and supplier as this will ensure provision of services applicable to the clientele.

(c) Declared commitments in areas of operation:-

If each of department head have a commitment made need to be taken into account when preparing the budget as they will limit what else that department can do.

(d) Financial information from suppliers:-

Suppliers are contacted by the relevant Department Head to ensure that the expenses recorded in the budget will reflect current pricing.

(e) Financial proposals from key stakeholders:-

Vision of the owner where they want to take the business in short term and long term. The budget prepared will reflect their wishes and needs.