What is a business Budget?

December 15, 2020 0 Comments

Do you know how to create one?

Hi E.O.B.Affiliate,

Budgeting is one of the most important tools in your life.  Whether you run a business or not you will have to deal with the ins and outs of a budget.  To many this may be a foreign concept and to some even if they do budget they not be using their budget.

There is a difference between doing your budget and using your budget. I have realized that we think by mealy writing our budget out we have satisfied the status quo and we just go ahead and spent our funds, however, we want.

What is a budget and what is it for?

Easily put a budget is an estimated Income expenditure set for a period of time. This may include sales volume, revenue, cash flow assets, and liabilities. This plan is for set intended items it may include savings, profit, and investment.  This is a business or financial document that reflects the Amount of money needed to fulfill the requirement of the line item stated in the budget document over a given period of time.

The planning tool is supposed to help foresee what strategies work to profit will accompany over time.  If set strategies are followed the outcome can be as close as possible to the forecast. Hence the need to plan and execute the budget as planned.

There are a number of types of budgets –

  • Personal t or Family budge – This is a typical budget for planning running one’s personal financial budget. This will include Income, expenditure assets, liabilities, and debt.
  • Project Budget – This is based on cost estimates for items that may be needed to complete a project. This would include different tasks and responsible entities to execute elements of the line items. These may include production, Preproduction materials, cost of labor, and any related expenses.
  • Revenue Budget – This is all revenue documents, Tax revenues, receipt of government revenue, and expenditure recipe thereof.
  • Capital Budget – This is used to decide whether the development and growth of a company are feasible.
  • Cash Flow Budget – I am a predictive budget cost and expenditure for a specific period of time. It is usually short-term.
  • Marketing Budget – Estimated budget for marketing product/s. These are the funds needed for the labor and creation of ads, promotions to sell products and build the company brand.
  • Expenditure Budget – This is a spending budget that focuses on known items and the cost that will be involved in settling the line items.
  • Zero base budget – This is the kind of budget that is used when there are limited funds and all line items have to be submitted to be review by management and approved objectively according to the needs of the company.

So those with the best strategies and plans will help you reap the fruit, only if the budget is followed and carried out. There is no use in creating one so that you hide it in your filing.

The result that comes at the end of a set budget timeline will suggest whether the planning was successful
(Close to or accurately forecasted)  meaning whoever sets the budget knows what they are doing or not. This indicator will show how well the people responsible for the set items have followed the plan that works. Everyone involved must follow the set budget.

In big companies/organizations, every department sets a budget for the year and it is included in the institutions planning. The budgets set out the planned expenditures and possible revenues if any. The closer the forecast is to the final report, will prove the efficiency of the department and giving more trust to the management, of the department, allowing for budget growth/extension for their next period.

 

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Personal budget

Many households try and draw up budgets but do not follow through. What do I mean about this is? If you write a basic budget with the following line items:

Simple Budget
24-Feb-20
Net Income R8 000.00
Expenditure
Bond R3 562.63
Medical R2 173.00
Groceries R1 192.00
petrol R1 006.00
electricity R250.00
Subtotal R8 183.63
Deference -R183.63

This budget needs to be rectified before you can set it aside for use or approve it. For many that would be the set budget and come payday they would just try and pay whatever they can, sometimes adding other line items that were not part of the set budget plan, by so doing, defeating the purpose of this document and what it was meant for.

An Example of thinking through your budget would be:

Look for solutions – Which item can be adjusted what solutions you can try.

  • Petrol is a huge challenge but there are a couple of solutions to that. Try using public transport it is usually cheaper though unfordable.
  • Groceries can usually be reduced by looking at the cheaper brands.
  • Try finding a cheaper medical aid.

Trying those three changes could adjust and improve your planning.

Simple Budget
24-Feb-20
Net Income R8 000.00
Expenditure
Bond R3 562.63
Medical R1 900.00
Groceries R1 192.00
Transport R700.00
electricity R250.00
Subtotal R7 604.63
Difference R395.37

The new budget allows for a positive difference which can be set aside as savings. Your budget sows forward-thinking and the savings could help when there is an emergency you may keep the savings so that you continue with this new growth and introduce a new line item row for an emergency. You have to be disciplined to pay what you plan for. Your budget can also include description Column that will give instruction to haw the payment is done, who does them and when they should they be paid.

Accountability

You have to be resolute in your decisions with regard to your budget. Many have been trying but it is still a mystery how you maintain your budget especially when there are too many hands in the pot.

What we call a pretty mess!

In conclusion

It is best to put your knowledge to the test to make sure that you have grasped the concept and you can start developing the skill to suit your lifestyle. There are many apps that a freely available that you can download and immediately use. Regarding this, I can assure you, you are the one who will make sure that items are on the list and they are paid on time. So it is best to learn to implement your planned Budgets before relying on Apps initially.

Thank you,

Ntlhane

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