Answer to Question #80033 in Finance for Luke Nash

Question

Discuss the process of preparing a budget.


Question is about preparing a budget

include the budget types

Answer 1

Organizations prepare budgets that they use as a method of comparison when evaluating their actual results over the next year. The process of preparing a budget should be highly regimented and follow a set schedule, so that the completed budget is ready for use by the beginning of the next fiscal year.
Creating a budgeting process is the most effective way to keep your business - and its finances - on track.
The main aim of your annual business plan is to set out the strategy and action plan for your business. This should include a clear financial picture of where you stand - and expect to stand - over the coming year.
Business planning is most effective when it is an ongoing process. This allows you to act quickly where necessary, rather than simply reacting to events after they have happened.
There are many different types of budgets. The following types of budgets are commonly used by businesses:
Master Budget
A master budget is an aggregate of a company's individual budgets designed to present a complete picture of its financial activity.
Operating Budget
An operating budget is a forecast and analysis of projected income and expenses over the course of a specified time period.
Cash Flow Budget
A cash flow budget is a means of projecting how and when cash comes in and flows out of a business within a specified time period.
Financial Budget
A financial budget presents a company's strategy for managing its assets, cash flow, income, and expenses.
Static Budget
A static budget is a fixed budget that remains unaltered regardless of changes in factors such as sales volume or revenue.