Target Setting

Important financial technique – setting goals & objectives.
Managers use financial targets to monitor & assess success of financial control mechanisms.
Typical targets deal with sales volumes & expenditure levels, achieved via budgeting techniques.
Key principles around budgeting targets revolve around historical comparisons e.g. year-on-year. Able to determine operational trends and determine how to act upon them.
Necessary to establish links between budgets e.g. change in marketing budget may effect wages or I.T. costs.
Forecasts must be realistic – new sales volumes must be attainable. Over-optimistic goals may result in loss of staff morale, damage to company reputation.
Target setting should always be aligned with organisation’s goals. Departments should work well together under guidance from senior management,