A problem that can arise from starting the budget is when the person who created the budget gets an idea that the business will sell more items than the business is realistically able to do. If this happens the business will spend a lot of money on items that the budget believe the business will sell but in reality the business will not be able to sell this stock. IF the business is in the food industry and this problem happens it will end up going to waste as food goes off. This will result in the business losing a lot of money which they could spend elsewhere and if the business doesn’t have much money this money could have been used to pay off their expenses. If the business does lose this money they might run the risk of not being able to pay their bills which could lead the business running the risk of going bankrupt.
Mismanaging the advertising timeline
A problem that can arise is if you place the advertising costs in the same month of your sales. This is because the business is then unable to see in which months the product best sold. This could end up being a problem because if the business thinks their product isn’t selling they might consider pulling it from the market. This will be a problem because the customers might love this product but because the cost of advertising was included this might not be reflected in the budget. If the product was to be pulled due to this mistake in recording the figures the business could lose money and their customer’s trust. This will result in the business losing their market share to the competitors and the business will have to think of another product to try to win back customers or just put the old product back on sale.
Another problem is if the person who created the budget didn’t consider the amount the business will have to pay in taxes. This is because if the