Budget

Budget (from French bougette, purse) generally refers to a list of all planned expenses and revenues. It is a plan for saving and spending. A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods. In other terms, a budget is an organizational plan stated in monetary terms. In summary, the purpose of budgeting is to: è Provide a forecast of revenues and expenditures i.e. construct a model of how our business might perform financially speaking if certain strategies, events and plans are carried out. è Enable the actual financial operation of the business to be measured against the forecast. The Budget is of the following different types: Sales budget: The sales budget is an estimate of future sales, often broken down into both units and dollars. It is used to create company sales goals. Production budget: Product oriented companies create a production budget which estimates the number of units that must be manufactured to meet the sales goals. The production budget also estimates the various costs involved with manufacturing those units, including labor and material. Cash Flow/Cash budget: The cash flow budget is a prediction of future cash receipts and expenditures for a particular time period. It usually covers a period in the short term future. The cash flow budget helps the business determine when income will be sufficient to cover expenses and when the company will need to seek outside financing. Marketing budget: The marketing budget is an estimate of the funds needed for promotion, advertising, and public relations in order to market the product or service. Project budget: The project budget is a prediction of the costs associated with a particular company project. These costs include labor, materials, and other related expenses. The project budget is often broken down into specific tasks, with task budgets assigned to each. Revenue budget: The Revenue Budget consists of revenue receipts of government and the expenditure met from these revenues. Tax revenues are made up of taxes and other duties that the government levies. Expenditure budget: A budget type which include of spending data items. A sales forecast is a prediction based on past sales performance and an analysis of expected market conditions. The true value in making a forecast is that it forces us to look at the future objectively. The company that takes note of the past stays aware of the present and precisely analyzes that information to see into the future. Sales forecasting is a difficult area of management. Most managers believe they are good at forecasting. However, forecasts made usually turn out to be wrong! Marketers argue about whether sales forecasting is a science or an art. The short answer is that it is a bit of both. This tool has some disadvantages too. They can be : (1) The degree of accuracy required - if the decisions that are to be made on the basis of the sales forecast have high risks attached to them, then it stands to reason that the forecast should be prepared as accurately as possible. (2) The availability of data and information - in some markets there is a wealth of available sales information (e.g. clothing retail, food retailing, holidays); in others it is hard to find reliable, up-to-date information (3) The time horizon that the sales forecast is intended to cover. For example, are we forecasting next weeks' sales, or are we trying to forecast what will happen to the overall size of the market in the next five years' (4) The position of the products in its life cycle. For example, for products at the "introductory" stage of the product life cycle, less sales data and information may be available than for products at the "maturity" stage when time series can be a useful forecasting method Read more: http://www.justanswer.com/questions/2dt3b-budgets-explain-the-risks-associated-with-sales-forecasting#ixzz0iBCb0mPs