Budget: What it is, types and importance - GovtVacancy.Net

Budget: What it is, types and importance

Budgets are tools to improve control of finances, be it business, family, or personal.

Budget concept

A budget is a plan that shows in advance the income and expenses that are going to be had during a certain period of time.

It also refers to the total money required to undertake a project, specifying the different associated costs to carry out said work.

Types of budgets

according to its function

• Master budget: Plan that covers all the projects of a company.

• Production budget: Expresses the number of units to be produced, as well as their production costs ( labor, materials, technology, etc.).

• Operating budget: Indicates an estimate of the sales that a company will have, as well as the related expenses to produce and market what it sells.

• Sales budget: Provides information on the sales that are expected to have during a certain period of time.

• Purchasing budget: Amount of money allocated to purchase raw materials.

• Treasury budget: It is the one that anticipates the money that a company will have in the future.

• Cash budget: It is one that forecasts the inflow and outflow of cash from a company.

• Marketing budget: Reflects the amount of money that a company has to spend on operations related to marketing.

According to your income or expenses

• Income budget: Income of money that a company has during a certain period of time.

• Expense budget: Outflow of money that a company has during a certain period of time.

According to its time, it lasts

• Short-term budget: They cover planning for no more than one year.

• Long-term budget: They cover planning for more than a year.

According to your sector

• Public budget: It is the one that estimates the income and expenses of a public entity.

• Private budget: It is the one that estimates the income and expenses of a private entity.

According to your personal or family destiny

• Personal budget: It is a plan that reflects the income and expenses at the personal level. It is a tool to control individual expenses.

• Family budget: Plan that allows ordering the money that is intended for the family.

Budget Features

• It is an advanced plan.

• Quantify income and expenses.

• It is calculated within a certain time frame.

• The information it contains is detailed, structured, and precise.

• In other contexts, it can refer to the total cost of a project or service.

Importance of a budget

A budget is a financial instrument that allows the detailing of the income and expenses that are going to be had in advance, helping to visualize a more generic panorama of future operations.

This enables better management of the money that enters and leaves in a certain period of time, in addition to facilitating decision-making, optimizing resources, and reducing risks.

In summary, a budget is an essential tool that helps to meet objectives, especially when a good financial organization is necessary to keep under control the money that is received and the money that is spent.

 

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