登录查看更多内容

What are the best practices for creating an operating budget that accounts for unexpected expenses?

由人工智能和领英社区提供技术支持

An operating budget is a plan that projects your income and expenses for a given period, usually a year. It helps you manage your cash flow, allocate resources, and evaluate your performance. However, creating an operating budget can be challenging, especially when you have to account for unexpected expenses that may arise due to various factors, such as market changes, customer demand, supplier issues, or emergencies. In this article, you will learn some best practices for creating an operating budget that accounts for unexpected expenses and helps you achieve your financial goals.

此文章中的业界达人

由社区从 4 条内容中精选。了解更多

Asha Kanta Sharma

Assistant Manager - Finance & Accounts Decimal Technologies | Fintech | Financial Accounting

1 Know your fixed and variable costs

The first step to creating an operating budget is to identify your fixed and variable costs. Fixed costs are those that do not change regardless of your sales volume, such as rent, salaries, insurance, and depreciation. Variable costs are those that change depending on your sales volume, such as materials, labor, commissions, and utilities. You need to know your fixed and variable costs to calculate your break-even point, which is the minimum amount of sales you need to cover your expenses. You also need to know your fixed and variable costs to estimate your profit margin, which is the difference between your sales and your expenses.

添加您的观点

Asha Kanta Sharma

Assistant Manager - Finance & Accounts Decimal Technologies | Fintech | Financial Accounting
举报内容
To create an operating budget that accounts for unexpected expenses, consider incorporating contingency plans and flexibility. This involves building a contingency fund, conducting a comprehensive risk analysis, prioritizing spending categories, implementing rolling forecasts, involving key stakeholders, using historical data, establishing clear approval protocols, regularly reviewing and updating contingency plans, collaborating across departments, investing in risk mitigation strategies, conducting scenario planning, monitoring KPIs, implementing technology solutions, communicating contingency plans internally, and seeking professional advice.

已翻译

赞
Mattia Mucci

Treasury & Finance Manager
举报内容
The correct definition of variable and fixed costs is crucial to create a good controlling model. Not all costs are variable or fixed, a company can have semi-variable or semi-fixed costs (e.g. rent can be semi-fixed if I have to rent another warehouse to increase stock).

已翻译

赞

2 Forecast your sales and revenue

The next step to creating an operating budget is to forecast your sales and revenue. This can be done by using historical data, market research, industry trends, customer feedback, and your own goals. You should consider factors such as seasonality, competition, pricing, and demand when forecasting your sales and revenue. You should also be realistic and conservative in your projections, as overestimating your sales and revenue can lead to cash flow problems and underestimating them can lead to missed opportunities.

添加您的观点

Mattia Mucci

Treasury & Finance Manager
举报内容
A good way to manage revenue forecast, is to define a principal version of your estimations that compose the top line of your budget official version and in meanwhile you can create some simulation versions of your forecast sales and consequently of your budget.

已翻译

赞

3 Plan for contingencies

The third step to creating an operating budget is to plan for contingencies. Contingencies are unexpected expenses that may occur due to various reasons, such as natural disasters, equipment failures, legal issues, or customer complaints. You should set aside a portion of your revenue or income as a contingency fund, which can be used to cover these unforeseen costs. You should also review your insurance policies and contracts to ensure that you have adequate coverage and protection in case of emergencies. You should also monitor your budget regularly and adjust it as needed to reflect any changes in your income, expenses, or circumstances.

添加您的观点

Mattia Mucci

Treasury & Finance Manager
举报内容
During your budget process you can make some provisions and create fund that you can use in case of emergency (e.g. allowance for bad debt).

已翻译

赞

4 Track and evaluate your performance

The final step to creating an operating budget is to track and evaluate your performance. You should compare your actual results with your budgeted figures and analyze the variances. You should identify the causes of any deviations and take corrective actions if necessary. You should also measure your key performance indicators, such as sales growth, profit margin, return on investment, and customer satisfaction. You should use these metrics to assess your strengths and weaknesses and to improve your strategies and processes.

Creating an operating budget that accounts for unexpected expenses is not easy, but it is essential for your business success. By following these best practices, you can create an operating budget that helps you manage your finances, plan for the future, and cope with the uncertainties.

添加您的观点

5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

添加您的观点

Accounting

+ 关注

给文章评分

我们借助人工智能创建了此文章。您认为这篇文章怎么样？

很棒不太好

举报此文章

查看全部

What are the best practices for creating an operating budget that accounts for unexpected expenses?

1

2

3

4

5

1 Know your fixed and variable costs

2 Forecast your sales and revenue

3 Plan for contingencies

4 Track and evaluate your performance

5 Here’s what else to consider

Accounting

给文章评分

感谢您的反馈

更多Accounting相关文章

更多相关阅读内容