Budgeting is detailed planning for the allocation of funds in a business. It is sometimes referred to as the financial picture of the business; i.e., how the business plans to spend its financial resources. Whether the business plan is for next year, for the next three years, or for the next five years, budgeting can help keep on the right road. A budget is a translation of business plan into numbers. In its simplest form a budget is a detailed plan of future receipts and expenditures - a projected income statement.
The Budget Process can be summarized as below.
- Review last year's budget to see how well the business performed. Make a list of what changes may be needed in operations or the budgeting process based on differences between actual and projected amounts in each category.
- Calculate return on investment (ROI) for the previous year. Determine a realistic ROI goal for the coming year.
- Estimate changes in expenses for the coming year.
- Calculate the revenues needed to meet the ROI goals and anticipated expenses.
- Evaluate how realistic the revenue goals are.
- Readjust expense and ROI projections so that revenue goals are achievable.
- Monitor budget income and expense categories monthly, comparing actual to budgeted figures so that we can address any major aberrations immediately.
Harinya developed a budget system with the features like developing a new budget, budget based on existing chart of accounts, end year budget based on existing chart of accounts and also comparing the existing budget with the actual budget. The budgeting system also have reports specific to Globally Accepted Accounting Principles and International Financial Reporting Standards. |