Answer to Question #79338 in Finance for Hugh Heron

Question

What are the likely cost implications for a business which expands rapidly?

To what extent are the employees in a team/ section/ division responsible for:

Data collection to support the budget?
Developing realistic and attainable budgets for the section/ division?
Monitoring expenditure?
Using the budget to measure actual work against projected work achievements?

Answer 1

1) Financial risk is the most difficult to predict and painful can manifest in this way:
• Increased cash flows and tightened requirements
• Funds needed to service debt exceed cash flow
• Lack of analysis of ROI and capital investment
• Investments in unknown geographic areas and business areas, as well as in expansion of production capacities
• The need to attract additional risk capital

2)
Responsible: Data collection to support the budget.
Partially responsible: Developing realistic and attainable budgets for the section/division.
Responsible: Monitoring expenditure.
Partially responsible: Using the budget to measure actual work against projected work achievements.