What types of financial budgets do companies have?
A good company will make and have a budget that can help plan funds and control the activities of a company. By having a budget, companies can more easily estimate the costs that must be incurred by the company to support business activities or activities.
Budget management is important for companies to estimate the funds and expenditure transactions used by the company. This budget will later be processed into assets and products to support the achievement of company goals.
Below are the types of budgets that companies must have:
Sales Budget
This budget is made to predict future sales which contains plans for the types of goods to be sold, prices, quantities, times, and the place of the sale itself. Usually compiled based on sales projections that will be provided by the company and made in one period containing a budget plan for the next 1 year. The sales budget is also considered the key and the basis of the other stages of the company’s budgeting.
Production Budget
This type of budget contains all plans for the company’s units to be produced during the budget period. The production budget is the basis of making a production cost budget and is determined based on a planned sales or inventory plan such as the basis of production costs, labor costs, raw material costs, and factory costs.
Production Cost Budget
Contains marketing cost planning and administrative cost budget. And this type of budget will be used as the basis or standard in making cash budgets and profit and loss budgets.
Raw Material Cost Budget
Is a type of budget that is needed in the production process and contains all things planning regarding raw materials which states several raw materials and units of money.
By making this budget, the company can find out the purchase of raw materials that will be used as the basis or benchmark for preparing cash and profit and loss budgets.
Direct Labor Cost Budget
Contains predictions about labor costs for one budget period and can be used as a basis for preparing cash and profit and loss budgets.
In general, the direct labor cost budget has 2 calculation bases, namely: unit wages and hourly wages.
Factory Overhead Budget
Contains planning for factory overhead costs during the budget period and can be used in preparing cash and profit and loss budgets.
This type of budget usually includes several costs that must be incurred for the use of additional materials, indirect labor costs, supervision of production machines, taxes, insurance, to additional facilities needed in the production process.
Financial Budgets Inventory Budget
Inventory budgets usually contain all items of inventory for a given period.
The company will plan a detailed inventory budget, starting from what the value of inventory is and the amount of inventory that is still available in the coming period.
Meanwhile, manufacturing companies are divided into three types of inventory budgets such as materials, semi-finished goods, and finished goods.
Financial Budgets Program Budget
Contains the entire operational budget or company activities based on all the company’s main programs in the form of product types such as research and development programs.
This type of budget is created to help companies analyze the alignment of each company’s program.
Profit and Loss Budget
This type of budget prepared based on the operating budget contains predictions of the company’s profit or loss over a certain period of time.
In addition to predicting the company’s profit or loss, it can also be used as a basis for preparing a balance sheet budget.