WRITING

3.5 Budget report

Learners can write an executive summary that discusses budgeted figures, actual
Lesson outcome
figures and the variance between them by referring to a simple income statement.

Lead-in Report structure

[1] Table of figures; [2] Executive summary that: (a) reviews the
1 Read the basic calculations used in an income
table line by line, giving reasons for the figures; (b) discusses
statement. What are the main elements of cost of sales?
impact on future investment plans; (c) gives a provisional
What are the main elements of operating expenses? budget forecast
Vocabulary
Revenues – Cost of sales = Gross profit
variance = difference budgeted = forecast = expected
Gross profit – Operating expenses = Operating profit revenues = turnover = income expenses = costs
gross and net CapEx (capital expenditure)
Operating profit – (Interest, Tax, Depreciation) = Net profit OpEx (operating expenditure) sth is offset by sth else
sth outweighs sth else

2 Read the budget report on page 138. Decide if these Comparing figures
sentences are true (T) or false (F). be down/up (by) go down/up (from … to …)
1 The table at the top shows how the real figures are different be lower/higher fall/rise reduce/raise sth decline drop
be flat be unchanged be in line with
to the expected ones.
2 The company had two pieces of bad news: revenues were Vague language
less than forecast and the cost of raw materials was more a little lower a small drop around 130 considerably lower
than forecast. increase slightly less than half significantly higher
slightly more substantially less
3 The writer thinks that things will get worse by the end
of the year. Reasons
as a result of because of due to result in
Useful language Predictions
It might/may/could happen.
3 Discuss these questions, referring to the report on
page 138 and the Useful language box. It is likely/expected/forecast to happen.

1 Report structure In the report on page 138, can you identify It is likely/probable that it will happen.
the sections that deal with future investment plans and the I expect … I am optimistic that …
budget forecast (i.e. sections b and c in the Report structure
box)? Check the figures for variance – are they correct? 4 Read the report on page 138 again. Underline any
2 Vocabulary First, can you explain the difference between vocabulary or phrases that you would find useful
CapEx and OpEx? Second, if X is offset by Y, does it mean in writing a budget report.
(a) that X and Y have an opposite effect and so the final
situation remains more or less the same, or (b) that Y has a T Teacher’s resources: extra activities
greater effect?
The report contains examples of modal verbs for possibility.
3 Comparing figures Which words from the Useful language L Go to MyEnglishLab for optional grammar work.
box have a similar meaning to be down? Which words have
a similar meaning to be up?
page 118 See Grammar reference: Modal verbs: possibility
4 Vague language Most of the examples in the box come
from the report. Imagine that the vague expressions were
replaced with exact figures. What would be the impact on
the reader?
5A Work in pairs. Turn to page 139 and study

5 Reasons When do we use because, and when do we use

the table and notes. Check that you TASK
understand the figures. Can you add a
because of? Think about what kind of grammar structures few details of your own?
follow the two phrases. Can you give examples?
6 Predictions Compare the phrase revenue may be flat with B You are the Finance Director who prepared
revenue is likely to be flat and it is likely that revenue the income statement. Write the executive
will be flat. The meanings are the same, so what are the summary in around 400 words.
differences? Should you stick to one form in a report or use C Exchange executive summaries with your partner.
a variety of structures? Do they have a similar structure? Did you both
include a good range of language from Exercise 3?
Did your partner add any extra information?

• How successfully have you achieved the lesson outcome? Give yourself a score
from 0 (I need more practice) to 5 (I know this well).
Self-assessment
• Go to My Self-assessment in MyEnglishLab to reflect on what you have learnt.
36
 Additional material for writing

Lesson 2.5 6A & B Lesson 3.5 2, 3 & 4

Notes made in meeting Quarterly budget report for the period ending
30th June (in $000s)
Meeting: Project review – construction of Budgeted Actual Variance
Favourable
new plant (Unfavourable)

Client: RELAY. REVENUES

Date: 9 November Sales income 100,000 94,000 (6,000)
Time: 14:00 Cost of sales 40,000 43,000 (3,000)
Present: HK, YD, SW, ML Gross profit 60,000 51,000 (9,000)
In chair: PG
OPERATING EXPENSES
Apologies: DS, PA
Salaries 25,000 23,000 2,000
Marketing costs 15,000 14,000 1,000
1. Matters arising General expenses 12,000 11,000 1,000
Shortage of workers now solved – using new Total operating expenses 52,000 48,000 4,000
agency. But will need to pay higher wages
OPERATING PROFIT 8,000 3,000 (5,000)
to attract from abroad. YD asked how much
more – no clear answer.
Executive summary
2. Scope 1
In this second quarter ending 30th June gross profit was
Client now wants bigger warehouse – 20% down by $9,000,000 on the budgeted figure, a drop of
larger. Planning issues still to be resolved with 15% from the forecast $60,000,000. This was due to two
City Hall (next item). Obvs client expects factors. First, sales volume declined more than expected
increased cost – after the end of the February marketing campaign. Second,
but should this be 20% in line with extra area? cost of sales went up slightly because of an increase in the
cost of raw materials.
HK to prepare new budget for larger w/house.
2
3. Schedule This fall in gross profit was partly offset by a fall in
operating costs. This had three causes. First, salaries were
Waiting for response from City Hall re planning
lower because of the restructuring plan that took around
application. Mr Stephens at City Hall says next 130 middle managers off the payroll in March. Second,
few weeks. SW says no immediate issues re marketing costs were a little lower. This was a decision of
schedule as work on w/house not started yet. the Marketing Director because it appears that social
4. Cost media advertising is becoming less effective and so we
reduced spending in that area. Finally, general expenses
Higher wages and larger w/house prev
were lower than expected as a result of warmer weather
discussed. Re wages – will need to fight hard causing lower heating costs. These three factors taken
with agency as they will want to keep big % together resulted in a small drop in total operating costs,
for themselves. which is a positive.
3
5. Overall progress Overall, operating profit fell to $3,000,000, which is less
On track. ML said that client’s business obvs than half of our expected $8,000,000. This is likely to have
going well (need for bigger w/house). an impact on our investment plans. Currently we have
CapEx investments planned in the area of new equipment
So maybe we can squeeze them >20% for
for our plant in the Philippines and OpEx investment
extra construction costs on w/house? planned for extra advertising in the autumn to coincide
6. AOB with the launch of our new product line. These investment
Maria in Accounts leaving company after plans may have to be reviewed.
20 years. Party this Fri 13:00, meeting room 3. 4
After discussions with colleagues on the senior
7. Next mtg management team I am able to give some provisional
2 December. 14:00. Meeting room 1. forecasts for the rest of the year. Revenue is likely to be flat
over the third quarter, but could be significantly higher in
the fourth quarter when our new product line hits the
market. I expect the extra sales income from this line to
outweigh the costs of the launch, and so I am optimistic
that we can end the year on a positive note.

138