Workbook
introduction

1 ILM Super Series study links

This workbook addresses the issues of Costs and Budgets. Should you wish to extend your study to other Super Series workbooks covering related or different subject areas, you will find a comprehensive list at the back of this book.

2 Links to ILM qualifications

This workbook relates to the learning outcomes of Unit M3.27 Working with costs and budgets from the ILM Level 3 Award, Certificate and Diploma in First Line Management.

3 Links to S/NVQs in Management

This workbook relates to the following Units of the Management Standards which are used in S/NVQs in Management, as well as a range of other S/NVQs:

D6. Allocate and monitor the progress and quality of work in your area of responsibility

4 Workbook objectives

In our daily lives we all need to control expenditure (another name for costs), so that we have money to spend and save. Companies also need to control costs to help them make a profit and reinvest for the future. Business organizations must be competitive to survive, so keeping costs under control is an essential activity. Other organizations need to control costs to make the best use of resources.

We need to distinguish between cost control and cost reduction. Cost reduction is usually undertaken as a systematic programme to reduce existing levels of costs, perhaps because a company is facing difficulties, or needs to be able to match the prices of competitors. It may involve changing working methods, new sources of supply, or employing fewer people.

Cost control is a continuous and routine management function. It is almost certainly part of your job, for costs aren't just the concern of accountants and senior managers. What's more, you and your work team contribute to the final cost of whatever goods or services you provide, so it is important that you take an active interest in cost control.

In this workbook we will look at ways of controlling and monitoring costs. You will improve your understanding of these matters so that you and your work team can be more effective. And because most events and activities cost money, you will know that it's usually necessary to make financial plans to achieve your aims.

The same principles are relevant at work. Your organization has aims and objectives with financial implications and these are identified by using budgets.

By preparing budgets which allocate money to specific purposes, an organization seeks to gain more control over its activities. Careful monitoring then helps to ensure that spending is kept within bounds. Budgets are considered an essential tool by organizations in the management of their affairs.

Throughout the workbook we look at examples from different organizations. Some may or may not be directly relevant to you at the moment, but the principles may be appropriate to something you do at work. Costing techniques were developed for practical purposes. You should use them when relevant and not when they would be too costly to use or of little benefit. Of course, this means that you must be aware of what is available to you. Remember that there is value in a breadth of knowledge, even where something does not immediately appear relevant to you.

4.1 Objectives

When you have completed this workbook you will be better able to:

     identify different costs and how they behave;

     appreciate how important it is to control costs;

     understand how standard costing techniques help to control costs;

     use different methods for controlling and reducing costs;

     understand what a budget is and how they are used;

     help to draw up workable budgets;

     use some budgetary control techniques.

5 Activity planner

The following Activities need some planning and you may want to look at them now.