Budgeting
Overview
Budgeting is a process where an organization creates a forward looking financial statement for the purposes of planning. The statement is
desgined to be something of a forecast of what the financials will look like, but sometimes is designed to be more of a target than
a forecast.
The analytics involved is very similar to the techniques used in
financial statement forecasting.
Starting Budget
When budgeting, there are generally two differenct starting points from which to begin.
- Last Years Budget -
often provides the ideal starting point for this years budget. In particular, one can start with
last years budget, and then just make adjustments to the expenses that are forecasted to have changed. In particular,
one should account for
inflation in your budget forecasts.
- Project Plan -
if the budget being created is for a new project, then you will not have any relevant data to look back to.
In this case, it is best to create a project plan that indicates the resources required and timing. From this plan,
you should be able to create a first pass of the budget. Be aware of the limitations of the project plan to
fully project the costs of the project. There are inherent risks and uncertainties that may not be reflected in the
plan.
(see criticisms of waterfall modeling)
Sample Budget Data
Budget data can come in any of a number of formats. A simple format is a table with two columns, an account name or id,
and a value.
Consider the following budget data:
This data can be saved in text format as JSON. (see
Tabular Data)
which would look like the following:
[{"name":"equipment leases", value:2000}, {"name":"equipment repair", value:100}]
(for more information on data, please see
data on davinci)
Budget Analytics
