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Budgeting: can you have your cake and eat it?

Why did the Beeb lose ‘Bake Off’? Caron Betts exlains the budgetary reasons

November 2016

Much has been written in the past few weeks about the BBC’s loss of the Great British Bake Off to Channel 4. Why did Channel 4 pay some £25m a year for the show’s rights? Why didn’t the BBC bid higher? For the answers to these questions we need to look at the organisations’ respective budgets, and what a budget needs to achieve.
Quite simply a budget is a quantitative expression of a plan for a defined period of time. It is safe to assume both the BBC and Channel 4 will have prepared a budget outlining their planned expenditure on programming. In the negotiations to retain this programme, the BBC were some £10m short of the price required by the ‘GBBO’ production company. It is a sizeable sum and clearly the BBC were unable to find that additional amount in their budget without impacting other aspects of the business.
To understand why the BBC refused to increase their bid we need to appreciate the objectives of budgeting.
A useful way of remembering these is the mnemonic CRUMPET:
• Coordination – budgeting encourages managers and executives within a company to coordinate and keep costs manageable throughout the fiscal year.
• Responsibility – this is delegated to individual managers within an organisation.
• Utilisation – the budget guides the decision-making process to ensure the organisation does not acquire resources in excess of their needs or financial limits.
• Motivation – by providing a target, employees may be driven to improve their performance.
• Planning – as the budget is a financial plan it forces managers to make better decisions.
• Evaluation – a manager’s performance is likely to be compared with the budgets as set, with bonuses and promotions dependent upon the results.
• Telling – this is a means by which the leadership team communicate their expectations to their management team.
If the BBC ‘found’ an additional £10m to fund GBBO it would mean a loss to another show or department. Even for a top hit like GBBO, the manager has a duty to control their own departmental costs, and they are unlikely to exceed their department’s programme budget if it would have a negative impact on the assessment of their personal performance.
The ACCA F5 exam not only expects the student to understand how the budgetary system fits within the performance management aspects of a business, but also how to select and explain appropriate budgetary systems for an organisation. This aspect of budgeting is examined in one of AVADO’s ‘Report to the Board’ features, where students are challenged to apply their learning to a business situation.
AVADO launched their groundbreaking, fully online ACCA courses earlier this year which give students complete flexibility to study whenever and wherever suits them. AVADO already has Gold Approved Learning Partner Status from ACCA due to the quality of learning and student support.

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