The most forward-looking budget is the strategic plan which sets the overall goals and objectives of an organization. Some business analyst would not classfiy the strategic plan as actual budget. In any case, the strategic plan leads to long-range planning which produces the Financial Budgets. The Financial Budget make up of a few components, operating budget, investment budget, financing budget and cashflow budget. The terms used to describe these components vary from organization to organization. In any case, most Financial Budgets have common elements.
Operating Budgeting Spreadsheet or commonly known as the Profit & Loss Budget or Income Budgeting Spreadsheet, summarized the company’s business activities. This budgeting spreadsheet provides detailed projection of all estimated sales, income and expenses for the future usually for the next 12 months. Along with it, the formulae and assumptions used in the calcuations of the budgeted numbers are also disclosed. The budget also compares the budgeted numbers with the historical past 12 months or more results to justify its reasonableness.
Investment Budgeting Spreadsheet gives an indication of how the fund in the company are invested. The usual investments are computer hardwares and sofwares, office renovation, office furniture and fittings and motor vehicles. Other investments include buying shares of other companies or putting capital for setting up new companies. The budgeting spreadsheet also shows the return, if any, from these investments.
Financing Budgeting Spreadsheet provides details of how the company activities are being funded. Common funding activities are capital injection, loans from banks and advances from directors. The budgeting spreadsheet also show how the loans from banks and advances from directors are repaid.
Cashflow Budgeting Spreadsheet provides detials of the company’s inflow and outflow of cash over the budgeted period of time. The budgeting spreadsheet will gives indications that whether the cash comes in too early or too late to meet certain financial commitments.
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