what is bugeting?

Question

financial point of view and corporate terms.What are most important steps of preparation of a corporate budget?

Answer 1

#1.Itemize fixed expenses.
a.Rent
b.Utilities.
b.Salaries and wages.
c.Insurance
d.Phone
e.Advertising.
f. Machinery/Fixtures
g.Depreciation
h.Any note payments.
i.Interest payments.
Any expense that is necessary and remains constant.

#2.Descretionary expenses.
a.Subscriptions.
b.Travel and entertainment
c.Bonuses.
d.Shortages.
Anything that is under the control of management and can be reduced if necessary.

#3.Once all the above is itemized, then Income has to itemized.
a.Income from sales, ie. Gross Profits.
b.Interest income. ie. from credit accounts, bank deposits, etc.
Any other income.

Once these are known, or planned, all expenses can be compared to income and it can be determined whether a profit or loss will be generated.
If a loss is indicated, something has to be done, either some expenses cut or more income generated.

These plans must be flexible, as conditions change, and adjustments made as income is reduced or as expenses increase.

If one has read the news, Ford Motor Co., as well as others, are going through this right now.

Answer 2

1)Most impoartant aspect of budgeting is the standards.

Product or services need to have the proper costs allocated to them for each level of activity that they undergo through the process flow. When proper costs are not allocated your budget essentially becomes invalid because all your work ups to the final number are inaccurate. You cannot forecast profit and loss with inaccurate numbers. Without this fundamental you cannot forecast fixed and variable costs nor do you know where your biggest area of opportunity for improvement are.

2) Second biggest factor is accurately forecasting sales. Without an accurate forecast or worse, overstating your forecasted sales, all your allocations on fixed and varibale costs become invalid. When forecasting sales spend some time on doing checks to ensure you have not drastically overstated the sales.
Your variable costs can be flexed but fixed costs become harder to control.

3) Forecasting capital, what do you anticipate the company needs to spend on new equipment or technology. What do you need to spend on maintaining operations. This is often overlooked and companies either need to spend money they did not forecast or worse they avoid spending needed money on requirements to keep the business viable.

4) Cash flow forecast- Cash is "KING". Without the required cash you cannot pay your expenses and borrowing to maintain a positive cash flow costs you a lot of money. There is very little sense in having to pay out funds before you receive them.

These are 4 of the basic fundamental among many others.
An accurate budget can change the moment you have it approved but it is a road map for getting where you need to be,
If it is as accurate as can be on the top four fundamentals you can at least have some foresight into whats coming ahead and prepare accordingly.

Answer 3

Budgetting is a way of analzying the financial view of any organisation also it recognises the expenditure of an organization, which serves as guideline for any corporation so as not to over spend.