Budget Preparation Guide

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Budget Preparation Guide

Most of the time, preparation procedures and formats are inherited from predecessors. Give time to fleeting and tight deadlines are common. Most people who are involved in the budget, have always been too busy to rush and meet the deadline.

How many people really know the budget administer completely prepared? I was preparing the budget for the last 10 years of my career. I realized that many people who are involved in budgeting, whom I met, not really a excellent training or knowledge of the administer of preparing the budget in full.

Therefore, I have prepared this guide with an objective to provide a better understanding of the budgeting administer. This guide is based on actual practice and may differ from organization to organization.

Budget Preparation Guide:

budget templates and hours may differ from organization to organization. But, most base budgets have two major common components such as the operating budget and financial budget. From my experience, it is appropriate to have prepared the initially two years in a monthly format and the next three years or other annual format.

1. Operating Budget consists of:

a. Sales / budget revenue sources of revenue lines and how they were achieved.

b. Cost of sales / direct cost budget includes the costs directly related to the various revenue lines. The difference between the revenue / budget revenue and cost of sales / direct cost is the yucky margin.

v. The operating expenditure budget provides details on the treatment of indirect staff operating costs, rental of office, printing and stationery, telephone, etc. Such costs and expenses normally be incurred regardless of whether there are sales / revenue.

d. Publicity and promotion budget provides different plans of how the organization will promote its activities. Example would be the cost of publicity, promoting products and costs, etc.

The overall operating budget essentially provides a exact picture of the operation of the business and its bottom line.

2. financial budget consists of:

a. Capital budget provides details on capital expenditures such as renovation of offices, investment cost and equipment etc.

b. Income from the operating budget is the final upshot (bottom line or profitability) of the operating budget above. It can be a cash deficit or contribution of operating activities.

v. Cashflow budget provides the financing needs of business operations. It consists of:

i. The cash tide-operating activities.
ii. Cash from / used in investing activities.
iii. Cash from financing activities.

The financial budget focuses on financial aspects of the business. He will say if the company is self-financing cash holding or external demands cash from elsewhere.

Thomas Wong

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