Budget


A budget is a series of objective financial calculations and predictions, which establish the goals to which a company must reach within a specific period of time. Its main mission is to calculate the income and expenses of a company, business or family, in order to have an organized economic plan that can be supported in the presence of an unfavorable circumstance, that is, it seeks to prevent a notable lack of control at the entrance and outflow of money from an entity. However, in the commercial field, the term “budget” is used to describe the report that an establishment prepares to inform an interested customer of the cost of a product.

Generally, the budget plays a very important role for the economic stability of a company, since it can work both preventively and correctively and allows crucial operations to be carried out with much less risk. The budget, likewise, tries to coordinate the cost of managing various sectors within the same organization. The preparation of a budget must be very thorough, since it is necessary to take into account how the company works and the commercial sector in which it operates, in addition to the resources to be used, the profits and the losses of money.

Budgets can be classified according to their flexibility, duration and according to the sector to be applied within a company. When it comes to their mutability over the time period they cover (flexibility), they can be static (they show no change, based on the predictions being correct) or variable (they adapt to significant changes in the forecasts within the set action time). As for their time of action, these can be short-term (temporary) or long-term (a considerable time). Finally, applicability refers to which sector the budget would benefit from, highlighting master budgets, intermediate budgets, operating budgets, and investment budgets.