Sunday 16 December 2018

How to create business budget?

business budget

Understanding Business Budget

The Business budget is beyond just planning in detail about the number of units of the product to be produced during the coming period, which includes the plan regarding type (quality), the number (quantity), time (when) Business will do. Business budget means the budget activity, because the Business process is the activity of making products. The Business does not need to be budgeted, but scheduled.

In the narrow sense of Business budget is the amount that must be produced. The number of items that will be sold will reflect a different approach that is the wisdom of the level of Business that emphasizes on the stability of Business supplies that are floating, and if sales levels are emphasized at the discretion of the then controlling the level of inventory that floats. A combination of both would bring up Business and inventories will be changed in a certain time limit.

The Business Budget was drawn up having regard to all the Business activities that are needed to support the sales budget which has been drawn up. Business plan covering the determination of product that should be produced to meet the planned sale and maintain the level of inventory items so desired.

The Usefulness of the Business Budget

The Business budget is useful to guidelines work, coordination of work, Division of work and control of Business. All levels of the Business Division Manager should work based on Business budgets. In addition, the Business budget is useful for:

  • Support the sales activities,

  • Maintain inventory levels so that at any time asked by consumers,

  • Business in order to control the activities of create the lowest Business cost of goods – low.

In general, the Business budget is useful as a guide to work, coordinating work and supervision of work. Whereas in particular the Business budget can be useful as.

  • Support the activities of sales, so the products can be provided in accordance with the planned time.

  • Maintain adequate inventory levels by means of pursuit of supplies that are not too big and not too small.

  • Set up Business so that the Business cost is minimal as possible can be pressed.

As for the goal of the Business budget is as follows:

  • To achieve a certain level of profits, for example, how the results produced so that the level of profit can be achieved with a certain percentage of profits a year against sales.

  • Master a specific market, so that the results of the company were to have a certain market share.

  • Dress so that this factory company working on a certain level of efficient.

  • To initiate and maintain the order of work and employment opportunities existing surnaming can develop.

The factors that affect the Business budget

Business budget as calculated on the basis of the sales budget to determine the use of the budget, the budget of the purchase of materials, labor or wage cost budget direct labor cost, and the cost budget overhead factory. Business planning and scheduling the factory is a task that concerns the determination of the amount of goods produced, and the timing of Business. Therefore, the factors that affect the Business budget drafting, among others, are:

  • The sales Plan contained in the sales budget,

  • Capacities of factory and factory equipment available including the technology used,

  • Labor including recruitment, training, placement, payment, and termination of employment relationships,

  • Raw materials including transportation and warehousing, and

  • Working capital to run the Business process.

Factors of Internal and external factors in the preparation of the Budget of the Business:

Internal factors are factors that are within the company that have an impact on the continuity of enterprises:

  • Then it will be the year of the Sales benchmark.

  • The company policy related to selling price.

  • Payment terms of goods sold

  • Election of distribution channel

  • Labor-owned company (Quantitative or Qualitative)

  • Working capital owned company (Current Assets-Current liabilities) facilities owned company

  • The wisdom company owned another in the field of company.

  • External factors external factors / company, but have an impact on companies:

  • Competition Level of population growth rates of Community income

  • Level of education of the community

  • Community spread level of religion, customs and wisdom of the community, Government's

Preparation of The Business Budget

In the preparation of Business budget that prioritizes Business stability determined in advance the need for 1 year, then estimated the needs every month. Finally, the level inventory needs, so that Business remained stable.

Preparation of the Business budget depends on sales. In conditions of perfect competition market, sales budget is the main reference for drawing up Business budget, budget, budget marketing costs administrative expenses profit budget and operations. Business manager before carrying out the activity of drawing up Business budget in units and budget inventories finished goods in the unit.

A Business may run smoothly when interactions between factors of Business factors used ¬. When it is done perfectly, it will produce a good output. With the settings in the Business factors can be improve level of effectiveness and efficiency of the Business process which is ultimately the goal of Business management will be achieved by good.

Processing factors

The processing factors of Business should be done base on the occasion of the next select own opportunity which can be reach, in fact very many opportunities open to implement, but due to limitations in the factors of Business, then it should be done a procedure in accordance with the type of business and activities performed. "Formally it can be state that the procedure is part of the chronological order and manner which is set to carry out a job. Chronological order is the characteristic of every procedure, a procedure shows how each task will be implemented and who will carry it out ".

For it is the role of the planning procedure the Business in any very large companies, because all tasks perform in the Business process should be set in the plan. The planning procedure in setting then the leadership should pay attention to the following stages:

  • Set a goal or set of goals

  • Formulate the current state

  • Identify all the ease and barriers

  • Develop a plan or a series of activities to achieve the purpose of the budget outline the Business of prepare using common formulas as follows:

The level of sales (from the sales budget) ......................... XX
inventory Levels end....................................................... XX +

Number Of ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... XX
inventory Levels beginning ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .... XX-

Business levels................................................................... XX

Is the basis of Business Budget (business) for the preparation of the budget-budget budget such as raw materials, direct labor budget and budget overhead costs of the factory? Really relationship between the level of sales, inventory levels and levels can be describe in diagrammatically as follows:

Practical Steps Composing Business Budget

General steps for preparing the Business budget:

  1. Determine the period of time that will be use as the basis in the preparation of the Business budget align with the period that is use in the preparation of the sales budget.

  2. Determine the physical units of the item that will be generate.

  3. Specify the standard use of resources (raw materials, direct labor and the use of facilities.

  4. Determine the policy pattern of Business and inventory policy.

  5. Present the Business budget in a table. Presentation in the form of simple at least contain information about the time and the amount of Business.

  6. The amount of Business is calculate by considering the initial inventory and ending inventory finish goods. Business = Sales + provider final – initial inventory.
    For cases which are more complex rendering can be customize with the principle is clear and informative

Step-by-step Implementation of the Business Budget

In addition, you may also compose the main steps performed in order to craft a budget Business implementation:

The planning stages:

  1. To determine the period of time that will be fundamental in preparing the use as part of Business.

  2. Determine the number of physical units of the item that must be produce.

  3. Implementation Phase

  4. The determine when goods are produce.

  5. Determine where the goods will be produce.

  6. Specify the Business process.

  7. Determine the standard use of Business facilities to achieve efficiency.

  8. Compiling a program about the use of raw materials, labor, service and equipment.

  9. Drafting standard Business.

  10. Make improvements whenever necessary.

In the planning stages, it is said that the determination of the number of units of physical goods that must be produce with customize sales plan. In general, the sales plan is present in physical units, so count the number of items that must be produce is easy.


It is expect that 60 units of stuff will be in the hands of A company at the beginning of a period later. Sales during the period plan for 100 units. While the ending inventory is estimate to 40 units.
So companies have to produce goods with as many as 80 units, calculate as follows:

Sales of 100 units
ending inventory units 40 +

140 unit Needs
Initial Inventory 60 units –

80 Business units

and then, at the stage of implementation there are steps that determine when the goods will be produce by the company. In determining when an item will be produce, is estimate to be:

  • The length of the Business process, i.e. the length of time require to process raw materials into finish goods.

  • The amount of goods that will be produce during the period, with a look back at the sales budget.

For companies that have multiple times the same produce goods, length of process Business can be known by remembering those experiences in the past.

As for the companies that produce goods has never been so certain has no historical data about the item, it can do research by means of a simple form of proto type manufacture the goods that will be produce.

Determine or estimate the Business period and the amount of goods that will be produced, several factors must be consider. Factors – these factors include:

  1. Facilities factory: Programs Business must always be associate with the facilities available in the factory and always consider the efficiency of the use of such facilities.

  2. Warehousing Facilities: several types of goods requiring storage system specifically because of its properties that special anyway. Business too far exceeds the ability of the warehouse to store it would result in risks, which of course raises costs for companies.

  3. Labor Stability: Some kind of stuff has a seasonal demand. With the sales budget, base on specific months where sales volume is estimate to be high maybe companies should impose themselves in Business. In this case the company can add the laborer or adding laborer working hours every day. In addition to the necessary labor easily obtainable then no problem which may affect the smooth running of the Business. But if labor is not easy in May, means that are concern with employment stability is compromise. This can be avoid by making Business planning carefully and make wisdom in terms of inventory with more regularly.

  4. The stability of raw materials: In the raw materials use are not always available on the market it can jeopardize the smooth running of the Business process. Karna was wisdom in the purchase of raw materials is very noteworthy.

  5. Models use: Large small working capital available will have a big impact on small volume Business and inventories Sapience. In other words, the wisdom of the Business must be balance with the ability of the financial.

The Business Budget is planning and organizing in advance of people, materials, machinery, and other equipment as well as the necessary capital to produce goods at a particular future pride in accordance with What is need or foreseen.

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