The budgets of a company
Author: Aaron Ehasz
A budget is a management tool consisting of a document which forecasts or projections quantify different elements of a business.
Budgets are usually related only to income or expenses that a company, however, we can use these tools to quantify predictions or projections of any of the elements of a business, for example, we can budget the charges they perform, our debt payments, the products we manufacture, the materials required to produce such products, etc..
Budgets are essential tools for a business by enabling us to plan, coordinate and monitor our operations:
planning , budgets allow us to plan activities, schedule goals, resources, strategies, courses to follow, in anticipation of the facts and, therefore helping to reduce uncertainty and change.
Coordination : budgets are a guide to coordinate activities, allowing us to harmonize and integrate all sections or areas of the business, both among these, as with the objectives of the company.
control : the budget serves as a tool for monitoring and evaluation, allow us to compare the results with the budget for that, thereby, for example, to know what areas or activities there are deviations or variations (differences between the output and the budget) .
The budgeting system
To make best use of budgets, they are often used together, where they are all related.
This set of budgets or budget system called the master budget, you should always start with the sales budget, which is the base budget from which others will be made in this budget we predict our future sales in monetary terms.
After the sales budget, we can continue with budget billing, point out where the amounts receivable in the right dates, then the production budget (in the case of an industrial or production) or the procurement budget ( in the case of a trading company or service), then the budget requirement of raw materials, budget payments, expenses, debt, etc.
Culminating in the cash budget (projected cash flow), the operating budget (projected profit and loss state, or projected income statement), and the budget balance (balance projected).
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