A budget is a crucial ingredient for the establishment of any organisation. Additionally an organization’s financial as well as operational goals depends on the budgeting of business. If elaborated, growth of resources, profit line of business and infrastructural areas totally depend on the budgeting of a business.
If we think to establish a company,then budgeting plays a vital role because good budget can make fly you high while improper budget can create light risks. Also once your business is established, budgeting becomes a regular task that can be done normally on a quarterly and/or annual basis.
The budgeting of business depends upon the company’s VARIABLE & FIXED pay and on the basis of this, funds are allocated. Different companies have different terms used for budgeting purposes such as cash flow, etc.
The first step is to set up a plan for the up-coming year on a month-to-month basis. Starting with the first month, establish specific budgeted levels particularly for each category of the budget. The sales numbers will be critical and important asset, since it will be used to check gross profit margin and further help in determining operating expenses, as well as the accounts receivable amounts and inventory areas that need to be improved in order to enhance business growth at the next level.
DIFFERENT TYPES OF BUDGETS:
Every business can follow these different types of budgets:
- MASTER BUDGET: A master budget is an aggregate of a company’s individual budgets which is specially designed to present a complete picture of its financial activity and health areas of a company. The master budget combines factors such as sales, operating expenses, assets, and income streams to allow companies to look for the establishment of goals and evaluate their overall performance accordingly. It also looks for the individual cost centers within the organization. Master budgets are often used in larger companies to keep all individual managers aligned about business management.
- OPERATING BUDGET: It is a forecast and detail analysis of projected income of the company and overall expenses over the course of a set time frame. To create an accurate picture of the business, operating budgets must aligned for different factors such as sales overview, production management, labour costs for resources, materials costs of the product, overhead count, total manufacturing costs, and administrative expenses. Operating budgets are basically created on a weekly, monthly, or yearly basis. A manager might compare these reports month after month to see if a company is growing on good phase or the set budget needs to be modified.
- CASH FLOW BUDGET: It is a means of projecting how and when cash comes in and flows out of a business within a specified time period. It can be useful in helping a company determining the profit areas of business and regulate the growth of company at the next level.
- FINANCIAL BUDGET: It deals with all the transactions in terms of assets and liabilities of particular project within the company.
The benefits of budgeting can be elaborate as the best source in success of your business.It enables the businessmen to regulate the cash flow,reducing the expenditure and hence improving the overcome inputs of business.