Budgeting the process of defining a financial structure for your company. In most cases, the budget is scheduled for a year. And, there are several different types of budget for you to consider. Whether you are a big business, a government organization, or a non-profit company – you need to focus on budgeting. With the help of a sensible budget, you will be able to ensure that your firm runs as planned. And, lack of budgeting will increase the chances of overspending. With this being said, here are the top six types of budgets for you.
1. Cash flow Budget
This is one of the most commonly used types of budgets. As suggested by its name, this involves the flow of cash into and out of your business. The budget can be used for a predefined period of time. This kind of budget helps the company ensure that adequate funds are available for the company to continue.
2. Operating budget
The operating budget is a prediction of the income and expenditure of the company within a period of time. This budget is influenced by factors like labor cost, production, and maintenance charges. All of these parameters give a better picture of the company’s ability to function in the long run.
3. Financial budget
As suggested by its name, this strategy is all about managing the expenses and income of the company. It also involves other financial aspects. The overall financial capabilities of the company can be pictured using this strategy. Indeed, you can verify if your company’s financial health is good or not – using financial budgeting.
4. Sales budget
This kind of budgeting is required to check if your sales have reached expectations. When you sell products over a period of time, a specific target needs to be reached. This is definitely the spinal cord of any company. And, the nerve center has to be monitored for promising results. For long term ROI, you need to ensure that a specific sales budget is reached on time.
5. Production budget
The base for the sales budget is achieved from the production budget. This is all about understanding the stocks available, and how many products can be generated. The production budget defines the actual price of the product. And, every organization has a unique production budget.
6. Overheads budget
Finally, you have the overhead budget to cover all costs and expenditures required for a predefined period of time to fulfill production. This budget is not limited to direct, indirect, and labor expenses. Unlike the other types of budget, this covers overheads like distribution, admin, and factory maintenance too.