Page 28 - Budgeting for Managers

the equipment expense
Accurate Self-
line so you can purchase
Assessment
the third copier.
Expert managers understand the dif-
Doing this makes you
ference between what they know and
what they don’t know. It’s essential to
think about service con- Budgeting: Why and How 11
tracts, so you check. The know if there’s missing information or
two machines under five if something isn’t clear. It is better to
say honestly,“We spent $3,000 on sup-
years old will have service
plies last year, but we lost track of
contracts with renewal
$600,” than to try to hide that fact.We
options at the same rate,
learn best by being honest about the
of $500 each per year. The problem or our lack of knowledge and
service company you’ve resolving to learn more and to do bet-
been using won’t support ter next time.
machines over five years
old. You ask around and a friend tells you that there’s a local
repair shop that services older machines. You arrange a service
contract with them for the old machine at $600 per year. So,
you budget $1,600 for service contracts in 2003.
Now that we’ve planned the equipment budget, let’s take a
look at supplies. We use up supplies to support our rate of pro-
duction. For a copy shop, the key rate is the number of copies
a month and, in our example, almost all of that is plain paper
copying. In 2002, the copy shop averaged 5,000 copies per
month. Will it be different this year?
The best people to answer that question are your customers.
You could go to the manager or assistant manager or secretary
of each department and ask them if they are likely to want
more copies than last year, or less, or the same. When you add
up the numbers, you will have your estimate for production lev-
els, so you can estimate your expenses.
So, checking in with each customer, we discover that we will
probably make 72,000 copies this coming year, instead of
60,000, an increase of 20%. How does this information help you
estimate your budget?
The number of copies determines the amount of plain paper
and toner that you buy. So, we can increase these by 20%.