There is always a very close link between Financial Budget and Strategic Plan of an organization. In any case, Strategic Plan leads to long-range planning which produces Financial Budget. Long-range plan and Financial Budget give the company direction and goals for the future, while short term-term plans and budgets guide day-to-day operations. Most big organizations practice preparing two types of budgets, the Fixed Financial Budget and Flexible Financial Budget.

The Fixed Financial Budget or usually just refers as Financial Budget is normally prepared before end of the current financial year. The budget summarizes the planned activities of all subunits of an organization – sales, production, distribution and finance. The budget quantifies targets for sales, cost of sales, operating expenses, net income and cashflow. Once prepared, the financial numbers will not change.

The Flexible Budget or someimes refer as the Rolling Budget, is very similar to the Financial Budget in term of format and layout. The Flexible Budget takes the Financial Budget numbers and simply add a month in the future as the month just ended is dropped. Budgeting process is ongoing. The budget forces the managers to always think about the next 12 months and not just the remaining months in a fixed financial budget cycle. As they add a new twelth month to a continue budget, managers may update the other 11 months as well. Then they compare actual monthly result which with both the original plan and the most recently updated revised plan.

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